Leafy laws
Climate bills would save world's forests
Posted by Glenn Hurowitz (Guest Contributor) at 6:55 AM on 03 Jun 2008
Read more about: deforestation | climate | legislation | politics | agriculture
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* More money for forests and wildlife conservation than has ever been available in history
* The regrowth of many of the world's forests
* Massive quantities of greenhouse gases sucked out of the air
Those are a few of the benefits of the newest versions of the climate legislation now being considered in the House and Senate. Both the Boxer-Lieberman-Warner bill [PDF] and Rep. Ed Markey's latest proposal [PDF] include massive financing for forest and land conservation that could save these planetary lungs.
Both bills are based on a fundamental recognition that trees suck up vast quantities of carbon dioxide and convert it into oxygen -- and that standing pristine forests and grasslands (especially tropical forests) are a tremendous storehouse of carbon that we've got to keep safely locked up in forests. Indeed, deforestation for agriculture and logging is already driving 20 percent of greenhouse-gas emissions and is the biggest single source in the developing world.
And so these bills would unleash unprecedented levels of financing to preserve great natural reserves from Big Ag, Big Timber, and land-hungry peasants.
But the ways in which they do it -- and the overall scope of the bills -- could spell very different fates for the forests and grasslands they're meant to save. The Lieberman-Warner bill would allow polluters to offset their own pollution with more than 25 percent offsets through domestic and international forest, grassland, and agricultural conservation, reforestation, and afforestation -- amounting to billions of dollars a year in financing opportunities. Polluters are likely to jump at these forestry offset opportunities: Because of the relatively low price of land and the immense quantities of carbon stored in the forests, conserving forests is generally a lot cheaper than cleaning up industrial pollution.
The Markey bill takes a different approach. In the past, there's been some skepticism that offsets from forestry could be accurately tracked. In the words of a senior adviser to Markey's global warming committee, "You can't plug a meter into a tree to see how much carbon was sucked in that day." There were also concerns in the past that it would be hard to accurately track whether a forest that was "saved" would actually have been cut down in the absence of financing or conservation action.
Update [2008-6-4 10:15:34 by Glenn Hurowitz]:: Because of the concerns about accurately tracking international forestry, the Markey bill excludes international conservation and restoration from its offset programs, but not domestic forestry programs.
And so, when it comes to international forestry, domestic wildland and wildlife conservation, and improving agricultural practices (all of which could have a significant carbon benefit), Markey's bill proposes a different mechanism: Take the proceeds from the bill's auction of polluter permits and apply a certain percentage to conservation projects, both here in the United States and abroad (the Lieberman-Warner bill also includes provisions that channel money raised through the auctions to conservation, but it's not as central).
Each of these approaches has advantages and drawbacks. Doing conservation through offsets makes sense because there's a high level of certainty that the forests will actually get protected. Because of the cheapness of reducing carbon emissions through forest conservation and reforestation, to the extent they're allowed, polluters will pour money into conservation projects before turning their attention to the energy sector -- meeting a significant percentage of the approximately $11-15 billion needed annually [PDF] to halt deforestation worldwide.
On the other hand, the overall weakness of the Lieberman-Warner legislation means that any conservation gains achieved through its forestry and conservation programs could be completely undone by its lack of sufficiently aggressive action to truly solve the climate crisis. Because it doesn't achieve the 80-90 percent minimum reductions in greenhouse gases by 2050 that scientists say are needed to avoid catastrophe, it could spell doom for the very forests and wildlife it's meant to protect: Scientists warn that an increase of just 2-3 degrees C could cause the Amazon rainforest to turn into a vast grassland [PDF], releasing enormous quantities of carbon into the atmosphere and condemning millions of species to extinction (while turning grasslands around the world into lifeless deserts).
In contrast, the Markey bill goes much further toward reaching the carbon dioxide reduction goals scientists have laid out, and its forestry components are mostly gravy on top of the large reductions in pollution it achieves in the energy sector. But its land and wildlife conservation programs aren't guaranteed to reach anywhere near the scale projected, especially in the short run.
Because the Markey bill relies on auctions of pollution allowances to finance its forest and land conservation programs (as well as lots of other good programs), the amount of conservation is entirely dependent on the outcome of the auctions. Reducing global warming pollution could turn out to be far cheaper than anticipated (as occurred under the sulfur dioxide cap-and-trade system). Overall, that would be a good thing, but it would starve the essential forest and wildlife protection programs of the funds they need to play a part in stopping the climate crisis (and staving off mass extinction from other sources as well). Secondly, the $4 billion a year projected for international forest conservation is just in an average year. Because initial auctions would generate significantly less funding, it's unlikely the $4 billion figure would be reached for several years, likely condemning hundreds of millions of acres of rainforest to destruction in the meantime (these timeline concerns also apply to Lieberman-Warner).
In addition, Congress has shown a disturbing tendency to raid dedicated funding sources like this for the (non-environmental) priority du jour.
In contrast, requiring polluters to meet rigorous standards (or face large financial penalties) in order for their offset programs to be given credit will provide a virtually ironclad guarantee that all the forest protection offsets that are allowed under the bill will be achieved, and achieved through very high quality projects.
Finally, there's been tremendous progress in policy development around forestry that should allay some of the concerns at the root of the Markey funding mechanism. For instance, there has been a great deal of anxiety about "additionality" -- whether or not a forest saved through carbon finance would have been preserved through other means.
In fact, we know based on experience in Europe, the United States, and countries like Malaysia that business as usual will lead to the destruction of about 85 percent [PDF] of original forests in any given country. That means that almost any forest protected through carbon conservation would have fallen without it. To save governments the impossible task of figuring out which forests would have fallen and which wouldn't, it would be better to incentivize the protection of all pristine forests and, to be conservative, discount the value of their protection by, say, 50 percent (i.e., in most cases, reductions in energy pollution would be worth twice a forest saved).
Because of how cheap tropical forest conservation is, that wouldn't price many forests out of the carbon conservation market but would ensure that all forests and all forested countries, including those with strong preexisting forest protections, would benefit from carbon finance. (Of course, it's also a good idea to put a premium on the conservation of high biodiversity lands and lands close to the agricultural frontier that are in imminent danger of destruction.)
So what's to be done? Sens. Bernie Sanders and Bob Corker have teamed up to strip the Lieberman-Warner bill of its international offset provisions, preventing any climate funds from going to international forest conservation. That would achieve bigger reductions in pollution from energy sources, but it isn't likely to get that much support, as it would cause a significant increase in costs and leave a huge part of climate pollution uncovered.
But there is a way that could provide a guarantee for funding for conservation while allowing us to quickly and cheaply meet the biological imperative of large and rapid reductions in global warming pollution: change the way we look at those offsets. So far, they've been seen largely as a cost-containment measure. But that's not the only way to look at them. Instead, they could be seen as a way to achieve deep cuts more quickly and affordably than in current legislation. Currently, the Lieberman-Warner legislation would only generate a 71 percent reduction in greenhouse gases by 2050 and wouldn't achieve nearer-term reductions as fast as scientists say is necessary.
How could Lieberman-Warner be fixed and the Markey bill perfected? One way is to allow polluters to meet a greater proportion of their pollution cuts through forestry programs, saving them money. In exchange, they'd have to agree to meet much higher overall targets for pollution reduction, including more, relatively modest reductions from the energy sector. (Of course, this isn't a full remedy; the Lieberman-Warner bill's trillion dollar-plus windfall for polluters remains a major problem under this scenario.) Greenpeace has made an exciting and somewhat similar hybrid proposal on the international level to ensure high levels of funding for forest protection while bolstering more ambitious greenhouse gas targets).
This way, instead of aiming for 80 percent reductions by 2050, we could shoot for more than 90 percent or go even further to meet or exceed a 100 percent reduction rate. That's possible because a vast expansion of the world's forest carbon sinks along with a major clean energy transformation could actually mean that the earth is absorbing more carbon dioxide every year than it is emitting. That's the kind of breakthrough progress possible only through a real focus on protecting our forests and restoring the forests that we've already destroyed, both in the United States and around the world.
Of course, a massive tree-planting effort will require strong ecological protections of its own, and this is an area in which both bills could also be improved. Both bills include guidelines that favor the planting of native species so that these extensive new forests aren't just mono-cultural green deserts. But the bills need to go further to include explicit instructions that forests should be planted in a way that will enhance clean water and protect wildlife, avoiding the many problems that have bedeviled European forestry.
In short, robust forest conservation programs are essential to solving the climate crisis and achieving broad political support. In the same way that the clean energy revolution will bring prosperity, health, and a living planet to communities around the country and the world, powerful incentives to protect and restore the earth's forests will deliver major gains in greenhouse gas reduction, saving endangered species, and delivering prosperity to communities around the United States and the world by providing far more resources for development than traditional agriculture ever could.
Sunday, December 7, 2008
The tropical global warming solution
Bali conference could end deforestation overnight
Posted by Glenn Hurowitz (Guest Contributor) at 1:49 PM on 03 Dec 2007
Read more about: Bali 07 | climate | Indonesia | air pollution | deforestation | agriculture | greenhouse-gas emissions | climate change mitigation
Tools: print | email | + digg | + del.icio.us | + reddit | + stumbleupon
This post was co-written with Dorjee Sun, the head of Carbon Conservation, a company that works to protect forests in Indonesia from destruction.
-----
Photo: www.viajar24h.com via Flickr
Photo: www.viajar24h.com
Bali, Indonesia, is the perfect backdrop for this week's climate summit. No country better embodies the immense peril of inaction -- and the immense opportunity this meeting has to make massive and immediate progress in stemming the climate crisis.
Indonesia is the world's third largest global warming polluter, behind the United States and China, and just ahead of Brazil. But in Indonesia, like Brazil and the rest of the tropical world, pollution isn't coming from factories, power plants, or cars like it is in the industrialized world. Instead, almost all of it is coming from the rapid burning of the world's vast tropical forests to make room for timber, agriculture, and especially palm oil plantations. (Despite its green reputation, palm oil is anything but: a recent study in Science found that palm oil, like other biofuels, produces two to nine times more greenhouse gases than regular old crude oil because of the forests and grasslands destroyed for its production.)
Companies like Starbucks, Procter & Gamble, Cargill and Seattle's Imperium Renewables are paying top dollar to turn palm oil into food, cosmetics and biodiesel. That global demand has driven the value of a hectare of palms above $1000 (PDF) in some cases -- providing a powerful financial incentive to corporations, investors, and farmers to raze the forests, regardless of the consequences to the climate or to the endangered orangutans, tigers, and rhinoceroses - and indigenous people -- who need them to survive.
The Bali conference could immediately eliminate that perverse accounting by making sure forests and other wild lands around the world are financially valued for the carbon they store, and not just their potential as timber or agricultural land. The way to do that is to allow polluters to get credit for protecting forests that they can apply against their pollution reduction obligations, an idea called carbon ranching or avoided deforestation.
Polluters would jump at this opportunity. Protecting forests from destruction can cost as little as 75 cents per ton of carbon dioxide - even at higher costs, it's a fraction of the price (PDF) of cleaning up most industrial pollution. In the past, some environmentalists criticized carbon ranching for this very reason: they were concerned that if polluters focused their greenhouse gas reduction efforts on forest conservation, that would divert money from necessary clean-ups in industrial pollution. That's the wrong way to look at it. Because locking up carbon dioxide by protecting forests is so cheap, it means that the world can achieve bigger reductions in global warming pollution faster and for less money. Carbon ranching should be an argument for bigger immediate pollution reductions, from both forests and industry, not a way for polluters to get around their responsibility to clean up their own pollution.
Another concern is what's known as leakage (PDF): the idea that if you protect one parcel of forest, ranchers, loggers, and biofuel interests will just move their operations elsewhere, resulting in little additional protection. That worry, however, can be addressed if the forest protection project is global in nature, as the Bali conference is considering. If forests and other wildlands everywhere are valued for the carbon they store, it means that loggers, ranchers, and agribusiness everywhere will for the first time have to include environmental costs in their bottom line calculations -- and not just move their operations to an area with loose environmental protections. That will have a major side benefit, shifting production into areas where it does the least environmental harm.
Finally, there are concerns about enforcement: how can we ensure that once a polluter gets credit for protecting a forest that that forest stays protected? Many of the tropical countries whose carbon-rich forests will be the initial beneficiaries of the program lack the resources to implement existing environmental protections and are plagued by corruption. In many tropical countries, for instance, it's common for one underpaid forest ranger to have responsibility for an area of land the size of a small American state. And what happens if a government decides not to honor its international commitments -- could they just take a polluter's money, promise to protect a forest, and then let the loggers in anyway?
Fortunately, the unprecedented resources that carbon ranching will bring to forest conservation will provide the means to solve these challenges. Based on current carbon prices on European markets, a hectare of rainforest would be worth more than $10,000 purely for the carbon it stores. Applying just 1/10 of that amount towards enforcement will provide more resources than have ever before been available for forest conservation. In Indonesia, for instance, it could support more than 300,000 well-paying jobs in forest conservation (or one person for every 200 hectares of forest), while still leaving plenty of money for high-tech satellite monitoring. That would help ensure conservation provides permanent benefits and provides a major boost to the local economy.
Further guarantees can be secured through a system in which polluters don't receive all of the carbon credit at once for protecting a forest, but only get it on an annuity basis -- receiving credit for 1/50 or one 1/100 of the carbon stored in a forest per year. If the forest were destroyed, polluters wouldn't be able to recoup the remainder of their investment -- providing the polluters themselves with a powerful incentive to keep the forests safe.
Carbon ranching is a transformative idea whose time has long since come. Policy wonks and polluter lobbyists have spent the last ten years arguing over its merits and working out the details. In the meantime, the world lost (PDF) a whopping 125 million hectares of forest, resulting in a release of more than 50 billion tons of carbon dioxide into the atmosphere. And the biofuel boom has intensified the threat: in Brazil, agribusiness interests -- financed by George Soros, Goldman Sachs, and others -- are destroying the wildlife mecca of the Cerrado, at a rate of seven million acres a year. In the Congo, charcoal cartels are turning the living forest into fuel -- threatening to push mountain gorillas and other wildlife into extinction.
A decision at Bali to immediately give financial value to intact forests (and not wait until 2012, as some are proposing), would end this destruction (PDF) almost overnight (PDF). The world's climate -- and the forests and their creatures -- can't wait for anything less.
Posted by Glenn Hurowitz (Guest Contributor) at 1:49 PM on 03 Dec 2007
Read more about: Bali 07 | climate | Indonesia | air pollution | deforestation | agriculture | greenhouse-gas emissions | climate change mitigation
Tools: print | email | + digg | + del.icio.us | + reddit | + stumbleupon
This post was co-written with Dorjee Sun, the head of Carbon Conservation, a company that works to protect forests in Indonesia from destruction.
-----
Photo: www.viajar24h.com via Flickr
Photo: www.viajar24h.com
Bali, Indonesia, is the perfect backdrop for this week's climate summit. No country better embodies the immense peril of inaction -- and the immense opportunity this meeting has to make massive and immediate progress in stemming the climate crisis.
Indonesia is the world's third largest global warming polluter, behind the United States and China, and just ahead of Brazil. But in Indonesia, like Brazil and the rest of the tropical world, pollution isn't coming from factories, power plants, or cars like it is in the industrialized world. Instead, almost all of it is coming from the rapid burning of the world's vast tropical forests to make room for timber, agriculture, and especially palm oil plantations. (Despite its green reputation, palm oil is anything but: a recent study in Science found that palm oil, like other biofuels, produces two to nine times more greenhouse gases than regular old crude oil because of the forests and grasslands destroyed for its production.)
Companies like Starbucks, Procter & Gamble, Cargill and Seattle's Imperium Renewables are paying top dollar to turn palm oil into food, cosmetics and biodiesel. That global demand has driven the value of a hectare of palms above $1000 (PDF) in some cases -- providing a powerful financial incentive to corporations, investors, and farmers to raze the forests, regardless of the consequences to the climate or to the endangered orangutans, tigers, and rhinoceroses - and indigenous people -- who need them to survive.
The Bali conference could immediately eliminate that perverse accounting by making sure forests and other wild lands around the world are financially valued for the carbon they store, and not just their potential as timber or agricultural land. The way to do that is to allow polluters to get credit for protecting forests that they can apply against their pollution reduction obligations, an idea called carbon ranching or avoided deforestation.
Polluters would jump at this opportunity. Protecting forests from destruction can cost as little as 75 cents per ton of carbon dioxide - even at higher costs, it's a fraction of the price (PDF) of cleaning up most industrial pollution. In the past, some environmentalists criticized carbon ranching for this very reason: they were concerned that if polluters focused their greenhouse gas reduction efforts on forest conservation, that would divert money from necessary clean-ups in industrial pollution. That's the wrong way to look at it. Because locking up carbon dioxide by protecting forests is so cheap, it means that the world can achieve bigger reductions in global warming pollution faster and for less money. Carbon ranching should be an argument for bigger immediate pollution reductions, from both forests and industry, not a way for polluters to get around their responsibility to clean up their own pollution.
Another concern is what's known as leakage (PDF): the idea that if you protect one parcel of forest, ranchers, loggers, and biofuel interests will just move their operations elsewhere, resulting in little additional protection. That worry, however, can be addressed if the forest protection project is global in nature, as the Bali conference is considering. If forests and other wildlands everywhere are valued for the carbon they store, it means that loggers, ranchers, and agribusiness everywhere will for the first time have to include environmental costs in their bottom line calculations -- and not just move their operations to an area with loose environmental protections. That will have a major side benefit, shifting production into areas where it does the least environmental harm.
Finally, there are concerns about enforcement: how can we ensure that once a polluter gets credit for protecting a forest that that forest stays protected? Many of the tropical countries whose carbon-rich forests will be the initial beneficiaries of the program lack the resources to implement existing environmental protections and are plagued by corruption. In many tropical countries, for instance, it's common for one underpaid forest ranger to have responsibility for an area of land the size of a small American state. And what happens if a government decides not to honor its international commitments -- could they just take a polluter's money, promise to protect a forest, and then let the loggers in anyway?
Fortunately, the unprecedented resources that carbon ranching will bring to forest conservation will provide the means to solve these challenges. Based on current carbon prices on European markets, a hectare of rainforest would be worth more than $10,000 purely for the carbon it stores. Applying just 1/10 of that amount towards enforcement will provide more resources than have ever before been available for forest conservation. In Indonesia, for instance, it could support more than 300,000 well-paying jobs in forest conservation (or one person for every 200 hectares of forest), while still leaving plenty of money for high-tech satellite monitoring. That would help ensure conservation provides permanent benefits and provides a major boost to the local economy.
Further guarantees can be secured through a system in which polluters don't receive all of the carbon credit at once for protecting a forest, but only get it on an annuity basis -- receiving credit for 1/50 or one 1/100 of the carbon stored in a forest per year. If the forest were destroyed, polluters wouldn't be able to recoup the remainder of their investment -- providing the polluters themselves with a powerful incentive to keep the forests safe.
Carbon ranching is a transformative idea whose time has long since come. Policy wonks and polluter lobbyists have spent the last ten years arguing over its merits and working out the details. In the meantime, the world lost (PDF) a whopping 125 million hectares of forest, resulting in a release of more than 50 billion tons of carbon dioxide into the atmosphere. And the biofuel boom has intensified the threat: in Brazil, agribusiness interests -- financed by George Soros, Goldman Sachs, and others -- are destroying the wildlife mecca of the Cerrado, at a rate of seven million acres a year. In the Congo, charcoal cartels are turning the living forest into fuel -- threatening to push mountain gorillas and other wildlife into extinction.
A decision at Bali to immediately give financial value to intact forests (and not wait until 2012, as some are proposing), would end this destruction (PDF) almost overnight (PDF). The world's climate -- and the forests and their creatures -- can't wait for anything less.
Avoided Deforestation: Banking Green
Avoided Deforestation: Banking Green
By BRYAN WALSH
Right now in Noel Kempff Mercado National Park, a day's drive over rutted tracks northeast of the Bolivian city of Santa Cruz, they're counting the trees. Members of nearby indigenous communities, with help from the Bolivian green group Friends of Nature Foundation (FAN) and the American nonprofit the Nature Conservancy (TNC), have fanned out across the Noel Kempff's 4.2 million acres (1.7 million ha), which range from Amazon rain forest to dry savanna. In the footsteps of howler monkeys and endangered black jaguars, they follow mapped plots in the forest, drive stakes into the ground and measure out circles with diameters of 13 ft. (4 m) to 46 ft. (14 m) — and then within that area they chart the diameter of every tree. But it's not the number of trees they want to discover. They're really measuring carbon, and FAN and TNC can use those calculations — together with sophisticated satellite data — to work out precisely how much potential greenhouse gas is locked within Noel Kempff.
That matters, because in 1997 TNC, U.S. utility companies American Electric Power (AEP) and PacifiCorp, and oil major BP Amoco paid Bolivia $10.8 million for the credits represented by all that carbon. In return, the government simply has to ensure that the forest remains standing and healthy for the next 30 years. It's called avoided deforestation, and projects like this may represent one of the most promising ways to simultaneously slow the destruction of tropical forests and the pace of climate change — if we can get it right.
An estimated 50,000 sq. mi. (129,500 sq km) of forest are lost to the logger's ax or to fire every year, and that hurts the planet in two very important ways. Rare plants and animals, many still undiscovered, depend on the forests — especially the rich rain forests that encircle the earth either side of the equator. When the forests disappear, all that wildlife disappears as well. But trees also contain carbon, and while they live, they absorb CO2 from the atmosphere, compensating in part for the greenhouse gases spewed into the air from cars, power plants and factories. When trees are cut down or burned, that carbon is put back into the atmosphere, accelerating climate change. At least 20% of annual global carbon emissions come from deforestation. If we can't stop forest loss, we'll struggle to stop climate change. That fact was recognized by the British government's recent Eliasch Review on forestry, which estimated that failure to halt deforestation could increase the cost of damages caused by global warming by $1 trillion annually by 2100. "If we're going to solve climate change we need to take advantage of the opportunity to reduce deforestation," says Duncan Marsh, TNC's director of international climate policy. "We have no choice."
That's the promise of avoided deforestation, in which rich countries pay to keep rain forests standing and receive carbon credits in return. Currently, the international carbon cap-and-trade system organized by the Kyoto Protocol only recognizes industrial projects — such as a rich country paying to improve energy efficiency at a power plant — or programs to actively reforest land already cleared. It doesn't recognize avoided deforestation — also known by the acronym REDD, for Reduced Emissions from Deforestation and Degradation. With timber and biofuel plantations so valuable, that means "rain forests are worth more dead than alive," says Andrew Mitchell, director of the Global Canopy Programme, an alliance of forestry institutions. But a handful of pilot projects, like the one in Noel Kempff and others in nations such as Belize, Indonesia and Madagascar, are proving the logic of paying to keep forests standing. Supporters are confident that when the world meets for the annual U.N. summit on climate change in Poznan, Poland, this month, avoided deforestation will be one of the main topics of discussion. "This is too important not to be front and center on everyone's minds," says Jake Schmidt, head of international climate policy for the New York City-based Natural Resources Defense Council. "It will be a major focus."
For international companies looking to invest in REDD projects, there's another reason for signing up. Not only can they bank carbon credits for future use, but there's a p.r. benefit that comes from protecting an endangered tropical forest that might not come, say, from cleaning up a chemical factory in China (even though the value to the climate is identical).
That bonus appeals to corporations like AEP, which provided the bulk of the funding for Noel Kempff. "It's not just about the greenhouse gases, but the habitat preservation and the watershed enhancement," says Diane Fitzgerald, AEP's managing director of environment and safety. But as long as avoided deforestation isn't recognized by the Kyoto Protocol or the European Union's greenhouse gas-trading system (the two main mandatory programs in the world) there is a limit to how useful it can be for companies that need credits to meet a carbon cap. AEP plans to take its credits to the Chicago Climate Exchange, a voluntary U.S. trading system — but if Washington doesn't include REDD in any future carbon cap, the credits would have little more than symbolic value. "I think there won't be real action until we see domestic and international policy that recognizes avoided deforestation," notes Fitzgerald. "We'll compare forestry offsets to projects like renewable energy, and we have to make the best financial decision." Until then, REDD will remain a boutique carbon investment.
A Forest of Problems
Avoided deforestation seems like a no-brainer — so why wasn't it included in the Kyoto Protocol? Ironically, it was omitted in part due to the work of a number of prominent environmental groups, including Greenpeace. They feared that avoided deforestation schemes could flood the trading market with countless cheap carbon credits; after all, there are an estimated 638 billion tons of carbon locked in the world's forests. If even a fraction of those credits are put on the market, it could let developed countries off the hook when it comes to making the hard changes in industry and energy use needed to really dent carbon emissions.
Then there is the problem of compliance. Who can guarantee that a "protected" forest won't go up in flames in a few years, or even be logged, rendering the credits useless? And if a REDD project succeeds in preventing a vulnerable forest from being ruined, won't loggers just move down the road, or to another country — again, with no net benefit for the climate?
At first, skeptics also fretted that countries with high rates of deforestation — Indonesia, the Congo, Nigeria — tend to rank high for corruption, making them less-than-reliable partners. "The environmental community developed a distaste for forest offsets, for a lot of valid reasons," says Bill Stanley, director of TNC's Global Climate Change Initiative.
More than a decade after Kyoto was signed, however, that opposition has eased. (The holdouts, like Greenpeace, tend to be skeptical of market-based solutions to climate change in general, not just REDD.) That's partly thanks to a better understanding that "if deforestation is 20% of the problem, it should be 20% of the solution," according to Benoit Bosquet, team leader of the World Bank's Forest Carbon Partnership Facility, which helps developing countries prepare for REDD projects. Tree-spotting has improved; Japan's alos satellite uses cloud-penetrating radar to detect deforestation even in the rainy Amazon, making projects cheaper to police.
Most importantly, the tropical nations that stand to benefit most from avoided deforestation began to make their voices heard in international climate talks, thanks to innovative leaders like Papua New Guinea's Kevin Conrad, one of TIME's Heroes of the Environment. That has prompted big rain-forest nations like Indonesia and Brazil, which were initially suspicious of exposing their sovereign forests to an international carbon market, to rethink REDD. Last month, representatives from a handful of Indonesian and Brazilian states signed a memorandum of understanding with several large U.S. states — including California, which has already adopted a carbon cap of its own — to explore avoided deforestation projects. The possibility of tapping into California's rich carbon markets has tropical nations salivating. "Until now, no one has said to [rain-forest nations] 'We'll give you a market for your credits,' " says Dorjee Sun, CEO of the avoided-deforestation group Carbon Conservation, which helped broker the deal. "This is the next step."
Advocates have been busy refining avoided deforestation to answer early criticisms. Because firms investing in carbon credits need to estimate how much deforestation would have happened without a scheme, REDD projects can only work in countries with high rates of deforestation. That alleviates concerns that money will be spent to protect forests under no threat. To address fears that protected forests might be lost through a fire or logging, brokers build in reserves — selling, for example, only 80% of the carbon actually contained within a forest, and tapping the remainder if some part of the protected area should be lost. To prevent leakage — the possibility that protecting one place will only move deforestation down the road — TNC in Bolivia measured the baseline rate of deforestation in the country to know just how much difference their efforts would make, and monitors the edges of Noel Kempff for forest loss. Third-party verifiers like the Climate, Community and Biodiversity Alliance and the Voluntary Carbon Standard help assure companies that their credits are worth the carbon and that local forest communities are helped and not harmed by the potential flood of REDD financing.
It may be that avoided deforestation's biggest obstacle will be its own success. If REDD is enshrined in the next global climate-change deal, set to be negotiated by the end of 2009, there is likely to be a sudden spike in demand for avoided deforestation projects, as developed countries angle to meet new carbon caps and tropical nations start to turn their forests into cash. But doing a REDD project right isn't easy, points out Zoe Kant, TNC's carbon markets manager and the brains behind the Noel Kempff project: experts are few, locales are remote and most countries lack the technical capacity to run schemes on their own. Some places will be tempted to take shortcuts. "We have to make sure our standards are credible, and we're not just delivering money that ends up in the bank accounts of central governments," says nrdc's Schmidt. "We need to change behavior on the ground, not just tomorrow but for the long term."
For those who care about forests and the climate, the promise of REDD is undeniable. The truth is that weaning the world off fossil fuels will be a monumentally difficult and expensive process, one that will demand technological innovations we haven't yet thought of. But halting deforestation, while not cheap — Britain's Stern Review in 2006 pegged the price at $5 to $15 billion a year — is doable now, provided we have the political will. If you want to know why, visit Noel Kempff. Its biological value was incalculable, but to the people who lived in the forest, its only financial value lay in dead logs. REDD changes that — and with 29% of the carbon revenue from the project promised to local communities, it can change their lives too. "We finally have a way to pay countries for protecting forests," says TNC's Marsh. That's good news for all.
By BRYAN WALSH
Right now in Noel Kempff Mercado National Park, a day's drive over rutted tracks northeast of the Bolivian city of Santa Cruz, they're counting the trees. Members of nearby indigenous communities, with help from the Bolivian green group Friends of Nature Foundation (FAN) and the American nonprofit the Nature Conservancy (TNC), have fanned out across the Noel Kempff's 4.2 million acres (1.7 million ha), which range from Amazon rain forest to dry savanna. In the footsteps of howler monkeys and endangered black jaguars, they follow mapped plots in the forest, drive stakes into the ground and measure out circles with diameters of 13 ft. (4 m) to 46 ft. (14 m) — and then within that area they chart the diameter of every tree. But it's not the number of trees they want to discover. They're really measuring carbon, and FAN and TNC can use those calculations — together with sophisticated satellite data — to work out precisely how much potential greenhouse gas is locked within Noel Kempff.
That matters, because in 1997 TNC, U.S. utility companies American Electric Power (AEP) and PacifiCorp, and oil major BP Amoco paid Bolivia $10.8 million for the credits represented by all that carbon. In return, the government simply has to ensure that the forest remains standing and healthy for the next 30 years. It's called avoided deforestation, and projects like this may represent one of the most promising ways to simultaneously slow the destruction of tropical forests and the pace of climate change — if we can get it right.
An estimated 50,000 sq. mi. (129,500 sq km) of forest are lost to the logger's ax or to fire every year, and that hurts the planet in two very important ways. Rare plants and animals, many still undiscovered, depend on the forests — especially the rich rain forests that encircle the earth either side of the equator. When the forests disappear, all that wildlife disappears as well. But trees also contain carbon, and while they live, they absorb CO2 from the atmosphere, compensating in part for the greenhouse gases spewed into the air from cars, power plants and factories. When trees are cut down or burned, that carbon is put back into the atmosphere, accelerating climate change. At least 20% of annual global carbon emissions come from deforestation. If we can't stop forest loss, we'll struggle to stop climate change. That fact was recognized by the British government's recent Eliasch Review on forestry, which estimated that failure to halt deforestation could increase the cost of damages caused by global warming by $1 trillion annually by 2100. "If we're going to solve climate change we need to take advantage of the opportunity to reduce deforestation," says Duncan Marsh, TNC's director of international climate policy. "We have no choice."
That's the promise of avoided deforestation, in which rich countries pay to keep rain forests standing and receive carbon credits in return. Currently, the international carbon cap-and-trade system organized by the Kyoto Protocol only recognizes industrial projects — such as a rich country paying to improve energy efficiency at a power plant — or programs to actively reforest land already cleared. It doesn't recognize avoided deforestation — also known by the acronym REDD, for Reduced Emissions from Deforestation and Degradation. With timber and biofuel plantations so valuable, that means "rain forests are worth more dead than alive," says Andrew Mitchell, director of the Global Canopy Programme, an alliance of forestry institutions. But a handful of pilot projects, like the one in Noel Kempff and others in nations such as Belize, Indonesia and Madagascar, are proving the logic of paying to keep forests standing. Supporters are confident that when the world meets for the annual U.N. summit on climate change in Poznan, Poland, this month, avoided deforestation will be one of the main topics of discussion. "This is too important not to be front and center on everyone's minds," says Jake Schmidt, head of international climate policy for the New York City-based Natural Resources Defense Council. "It will be a major focus."
For international companies looking to invest in REDD projects, there's another reason for signing up. Not only can they bank carbon credits for future use, but there's a p.r. benefit that comes from protecting an endangered tropical forest that might not come, say, from cleaning up a chemical factory in China (even though the value to the climate is identical).
That bonus appeals to corporations like AEP, which provided the bulk of the funding for Noel Kempff. "It's not just about the greenhouse gases, but the habitat preservation and the watershed enhancement," says Diane Fitzgerald, AEP's managing director of environment and safety. But as long as avoided deforestation isn't recognized by the Kyoto Protocol or the European Union's greenhouse gas-trading system (the two main mandatory programs in the world) there is a limit to how useful it can be for companies that need credits to meet a carbon cap. AEP plans to take its credits to the Chicago Climate Exchange, a voluntary U.S. trading system — but if Washington doesn't include REDD in any future carbon cap, the credits would have little more than symbolic value. "I think there won't be real action until we see domestic and international policy that recognizes avoided deforestation," notes Fitzgerald. "We'll compare forestry offsets to projects like renewable energy, and we have to make the best financial decision." Until then, REDD will remain a boutique carbon investment.
A Forest of Problems
Avoided deforestation seems like a no-brainer — so why wasn't it included in the Kyoto Protocol? Ironically, it was omitted in part due to the work of a number of prominent environmental groups, including Greenpeace. They feared that avoided deforestation schemes could flood the trading market with countless cheap carbon credits; after all, there are an estimated 638 billion tons of carbon locked in the world's forests. If even a fraction of those credits are put on the market, it could let developed countries off the hook when it comes to making the hard changes in industry and energy use needed to really dent carbon emissions.
Then there is the problem of compliance. Who can guarantee that a "protected" forest won't go up in flames in a few years, or even be logged, rendering the credits useless? And if a REDD project succeeds in preventing a vulnerable forest from being ruined, won't loggers just move down the road, or to another country — again, with no net benefit for the climate?
At first, skeptics also fretted that countries with high rates of deforestation — Indonesia, the Congo, Nigeria — tend to rank high for corruption, making them less-than-reliable partners. "The environmental community developed a distaste for forest offsets, for a lot of valid reasons," says Bill Stanley, director of TNC's Global Climate Change Initiative.
More than a decade after Kyoto was signed, however, that opposition has eased. (The holdouts, like Greenpeace, tend to be skeptical of market-based solutions to climate change in general, not just REDD.) That's partly thanks to a better understanding that "if deforestation is 20% of the problem, it should be 20% of the solution," according to Benoit Bosquet, team leader of the World Bank's Forest Carbon Partnership Facility, which helps developing countries prepare for REDD projects. Tree-spotting has improved; Japan's alos satellite uses cloud-penetrating radar to detect deforestation even in the rainy Amazon, making projects cheaper to police.
Most importantly, the tropical nations that stand to benefit most from avoided deforestation began to make their voices heard in international climate talks, thanks to innovative leaders like Papua New Guinea's Kevin Conrad, one of TIME's Heroes of the Environment. That has prompted big rain-forest nations like Indonesia and Brazil, which were initially suspicious of exposing their sovereign forests to an international carbon market, to rethink REDD. Last month, representatives from a handful of Indonesian and Brazilian states signed a memorandum of understanding with several large U.S. states — including California, which has already adopted a carbon cap of its own — to explore avoided deforestation projects. The possibility of tapping into California's rich carbon markets has tropical nations salivating. "Until now, no one has said to [rain-forest nations] 'We'll give you a market for your credits,' " says Dorjee Sun, CEO of the avoided-deforestation group Carbon Conservation, which helped broker the deal. "This is the next step."
Advocates have been busy refining avoided deforestation to answer early criticisms. Because firms investing in carbon credits need to estimate how much deforestation would have happened without a scheme, REDD projects can only work in countries with high rates of deforestation. That alleviates concerns that money will be spent to protect forests under no threat. To address fears that protected forests might be lost through a fire or logging, brokers build in reserves — selling, for example, only 80% of the carbon actually contained within a forest, and tapping the remainder if some part of the protected area should be lost. To prevent leakage — the possibility that protecting one place will only move deforestation down the road — TNC in Bolivia measured the baseline rate of deforestation in the country to know just how much difference their efforts would make, and monitors the edges of Noel Kempff for forest loss. Third-party verifiers like the Climate, Community and Biodiversity Alliance and the Voluntary Carbon Standard help assure companies that their credits are worth the carbon and that local forest communities are helped and not harmed by the potential flood of REDD financing.
It may be that avoided deforestation's biggest obstacle will be its own success. If REDD is enshrined in the next global climate-change deal, set to be negotiated by the end of 2009, there is likely to be a sudden spike in demand for avoided deforestation projects, as developed countries angle to meet new carbon caps and tropical nations start to turn their forests into cash. But doing a REDD project right isn't easy, points out Zoe Kant, TNC's carbon markets manager and the brains behind the Noel Kempff project: experts are few, locales are remote and most countries lack the technical capacity to run schemes on their own. Some places will be tempted to take shortcuts. "We have to make sure our standards are credible, and we're not just delivering money that ends up in the bank accounts of central governments," says nrdc's Schmidt. "We need to change behavior on the ground, not just tomorrow but for the long term."
For those who care about forests and the climate, the promise of REDD is undeniable. The truth is that weaning the world off fossil fuels will be a monumentally difficult and expensive process, one that will demand technological innovations we haven't yet thought of. But halting deforestation, while not cheap — Britain's Stern Review in 2006 pegged the price at $5 to $15 billion a year — is doable now, provided we have the political will. If you want to know why, visit Noel Kempff. Its biological value was incalculable, but to the people who lived in the forest, its only financial value lay in dead logs. REDD changes that — and with 29% of the carbon revenue from the project promised to local communities, it can change their lives too. "We finally have a way to pay countries for protecting forests," says TNC's Marsh. That's good news for all.
Monday, July 28, 2008
Can Carbon Credits Slow Global Warming?
By Anya Kamenetz
Camille Rebelo talks fast, with an intimidating British accent. The Kenyan-raised daughter of an Indian father and English mother, she's back from Indonesia and on her way to Mozambique when we meet at a coffeehouse near Yale University, where she earned a master's from the School of Forestry & Environmental Studies last year. Rebelo's devotion to tropical forests dates to her gap year after high school, which she spent doing wildlife surveys and sleeping in a hammock in Belize. "I went to university to study biology and figured I wanted to be back in a forest as soon as possible," she says.
But today she's no pith-helmeted biologist or furry eco-warrior eking out a living at a nonprofit. Instead, Rebelo has joined an elite for-profit field that barely existed eight months ago: carbon forestry. "I focused my courses at Yale around independent studies to look into this stuff," she says. "Back then, in 2005, it was still unknown." Now, "it's growing like crazy, and pretty much any forestry student you speak to at the moment wants to do [carbon credits]." In fact, a network of recent Yale forestry grads like Rebelo, many of them with joint MBAs, have been finding careers in the unlikely worlds of hedge funds, private equity, asset management, and corporate consulting. They are exerting tremendous influence over the brand-new market in greenhouse-gas credits, which is projected to reach $1 trillion in the United States alone. The work is prestigious, it's trendy, and it's surprisingly well paid. "I'm making five times what I ever thought I'd be making as a tropical forester," Rebelo says.
The word "forester" evokes a spotted-owl census taker or maybe Julia Butterfly Hill camped in a redwood. And in the course of its history, stretching back over a century to the early days of the National Park Service, Yale's School of Forestry & Environmental Studies (FES) has pumped plenty of those types out into the world. But as another recent grad explains, "There aren't nearly as many communists in the forestry school as there were 20 years ago." Maybe money really does grow on trees.
"Capitalism, long the alleged enemy of the environment, is today giving new life to the environmental movement." That was one of California Governor Arnold Schwarzenegger's applause lines at a speech he gave at Yale this past April. It's also the basic philosophy behind cap-and-trade policies -- that government should set the rules and step back, letting a market emerge, as the best way to fight global warming.
The theory is that the invisible hand of the markets will find the fastest, cheapest, most efficient way to make the necessary reductions in greenhouse gases. Under a cap-and-trade system, pioneered in the United States for acid rain, a government sets a national ceiling on emissions (the cap), which lowers annually. The clever CEO will, in principle, figure out a way to reduce her company's emissions to below her allotment. By carefully measuring how much carbon dioxide she's saving, she can sell the difference to someone who is unable or unwilling to meet his own goal (the trade).
In Europe, legal limits to greenhouse gases were put in place under the United Nations' Kyoto climate treaty, which the United States refused to sign; the resulting cap-and-trade market, launched in 2005, is the world's biggest. No such cap exists in U.S. law -- yet. But with both John McCain and Barack Obama publicly endorsing cap and trade and several bills circulating in Congress outlining different models, U.S. companies are beginning to see that legal limits on carbon are simply a matter of time. Looking to shape national policy, a coalition of powerful corporations -- heavy hitters such as Alcoa, BP America, GE, and Shell -- have formed the United States Climate Action Partnership, joining with big enviro organizations to lobby for cap and trade. To get a jump on potential liability, U.S. companies are buying carbon credits in anticipation, creating a voluntary carbon-offset market here.
The likes of Goldman Sachs, JPMorgan, and Morgan Stanley, along with specialized environmental-investment firms such as EcoSecurities and Natsource, have begun buying, selling, managing, and advising on hundred-million-dollar portfolios of carbon-offset projects. They're developing an array of sophisticated financial instruments that can be bundled, sliced, and swapped -- with each transaction bringing in a tidy fee. U.S. trade in offsets doubled in 2005 and 2006, and nearly tripled in 2007 to a total of $330 million. The worldwide market in carbon, dominated by Europe, already tops $64 billion.
In the speculative frenzy of a market like this, just as with the dotcom boom 10 years ago, the paradox is that the leading experts tend to be kids in their twenties fresh out of grad school. While Michigan's and Duke's programs are players too, Yale grads are at the top of that list. "When I go to these carbon conferences, if eight names are mentioned, maybe six of them are joint degree or FES," says Radha Kuppalli, a 30-year-old Yale FES grad with an MBA. Kuppalli's career stretches back about as far as the carbon market itself. Just out of college in 2002, she worked at Natsource, where she helped write the World Bank's official annual report on the carbon market. "Back then, it was small enough that you could follow every single trade," she says. Now, she tells me with a wide, excited grin, "we're really market leading -- we're making this stuff up as we go along."
The idea of carbon credits can be traced through a single corporation, AES, one of the world's largest power companies. Back in the late 1980s, AES began planting trees and preserving existing forests in Central America, and calculating the CO2 that would be absorbed from the air as a result. "We did those as social-responsibility projects," says Bill Lyons, now president of AES's Climate Solutions Business, "before Kyoto was a twinkle in anybody's eye." By last year, the company had entered into a partnership with GE to bring the largest single portfolio of carbon credits to market: 10 million tons, expected to grow to 34 million by 2012. The credits come from offset projects around the world, including trapping methane from animal waste, landfill gas, and palm-oil mill effluent; lighting efficiency (in India); and coal-mine ventilation (in Africa and Asia). "We view this as a long-term business," Lyons says.
How does a lagoon of cow manure become a ton of internationally tradable carbon? Through a combination of experimental finance and experimental project development -- all dreamed up and implemented by supersmart, often Yale-trained, ecologists. Rebelo, for example, works as an independent consultant for power and timber companies. Her clients are buying or planting huge tracts of trees, calculating the amount of carbon they absorb from the atmosphere each year, and then certifying that "removed" carbon as credits, one ton at a time. "My role is the carbon," she says. "I do all the baseline studies, put the methodology together, and do the monitoring and documentation required for certification."
The trickiest part comes in the third-party verification, to which all such projects must submit. In setting the "baseline," Rebelo must prove that the tree she's "saving" would otherwise be cut down. She must also somehow ensure that saving one tree won't lead to two trees being cut down somewhere else and that a tree she is saving one year won't burn down the next. Such assumptions suggest why some observers distrust the offset concept altogether: There's a lot of room to fudge.
Yale forestry grads didn't go from counting Ponderosa pines to pricing risk overnight. They needed shrewd businesspeople to open their eyes to the larger opportunity -- people such as John Forgach. A Brazilian millionaire with a courtly manner, Forgach spent three years teaching at FES, just as the international carbon market was heating up, and his classes, especially a business-plan class he taught with the former head of private equity at JPMorgan, were oversubscribed. He was considered a "bit of an itinerant preacher," as one of his former students puts it, whose sermons focused on the glories to be won by combining environmental expertise with financial acumen. And through his connections in international finance, industry, government, and academia (he has also taught at the London School of Economics and Madrid's Instituto de Empresa), Forgach helped get a few dozen students, including Kuppalli, jobs or internships. The FES and joint-degree MBA grads who sat in his classes are now in Argentina, Brazil, Ecuador, Indonesia, Papua New Guinea, and South Africa, brokering carbon deals.
Forgach traded oil before he traded trees. In fact, he made millions selling oil and petro-products all over West Africa, so it should come as no surprise that his interest in carbon is more than ecological. Still, he has abundant charisma and enough lefty patter to win over most Yalies. (Full disclosure: I too graduated from Yale, but not the FES.) "I was a philosophy student in Paris in '68, on the barricades," he tells me over lunch at an Indian restaurant. "Then I went to Harvard for my BA; we invaded the administration building and set on fire a few other things." Unlike most counterculture heroes, Forgach studied finance with John Kenneth Galbraith and government with Henry Kissinger, and moved on to a post in commodities trading with the famously Clinton-pardoned Mark Rich, leaving before there were any indictments. "I come from a very old European family," he says. "They paid for my education, but my fortune I made myself under the old moral standards -- meaning, you take the most advantage of all the hanky-panky in business and government."
In 1994, ensconced in his estate on Lake Geneva, Forgach had a midlife crisis. He'd discovered that "my friends were just friends of my assets," so after nearly 30 years as an expatriate, he returned to Brazil to devote himself to his passion for tropical birds. While founding sanctuaries for macaws rescued from international trafficking, he discovered the still-nascent concepts of sustainable forestry and environmental investing, and ended up managing the first World Bank biodiversity venture fund. The plug was pulled at the start of the Iraq War (thanks, he says, to "that ass in the White House"), but immediately afterward, his friend Gus Speth, the dean of Yale's FES, offered him a teaching fellowship. "My job was to be a trampoline for these students," Forgach says. "Before, the environment-school guys would graduate as biologists in the fields with the butterflies. And the business-school guys, all they wanted to do was make a killing at a hedge fund and buy a house in Greenwich. This program put a heart in the business executive and a head on the forestry-school guy."
Forgach himself seems to possess both a head and a heart, but ultimately, he emphasizes, he's a banker. "My argument is that we in business are the best equipped to handle these issues. The environment was much too serious a business to give to a bunch of bureaucrats who couldn't get a job in the real world," he says. "And I have a big bone to grind with [nonprofits]. They are interested in doing Indiana Jones in the forest, which is much more fun than shaping consumer opinions."
It's no surprise that his former students volunteer statements such as, "I don't think wealth is inherently bad. I philosophically feel like, unless markets value the environment, it will be destroyed," as Kuppalli puts it. Says another Forgach disciple from Yale, now in private equity: "True sustainability has to depend on economic performance."
Forgach helped goose the growth of the carbon market by populating the field with like-minded, energetic evangelists. And then he followed them back into the marketplace. "I was getting bored [at Yale]," he says, "and I was getting poor." When Baker & McKenzie, a leading international law firm, came to FES on behalf of a client looking for experienced environmental executives to start up a carbon business, Forgach stepped forward. He's now the chair of a private-equity firm, Equator Environmental, with a $170 million fund for sustainable forestry assets, including carbon credits from timber. "These Baker & McKenzie guys half my age said, 'The environment? This is ninny business for faggots and fairies. For girls.' I said, 'No, this is the future. If you don't do it, you'll be out of business.' "
With sons and daughters of Eli at the heart of the emerging carbon markets, one of the clear beneficiaries is Yale itself. While Harvard may lead its rival in the size of its endowment, Yale has staked a claim as the green Ivy of the future. The school has a brand-new Center for Business and the Environment and a high-profile campus-sustainability initiative, and president Richard Levin is being honored worldwide as an environmental leader. Yale's new philosophy could be summarized by the title of the best-selling book by Daniel Esty, founding director of the Center for Business and the Environment: Green to Gold. (Esty himself serves as a paid consultant for corporations such as BP, Coca-Cola, Honeywell, Shell, and Unilever.) "Our program at Yale reflects an understanding that the critical point of leverage for management of natural resources is the business world," Esty tells me. "I think it's very exciting to see how students are jumping right into that space."
Katherine Hamilton (FES class of '06) is the carbon-market manager at financial-information firm Ecosystem Marketplace, the Bloomberg of the carbon market. Kevin Tidwell ('06) is an associate at the Global Environment Fund, which is making several $30 million to $60 million investments in South American and African forests. Marc Hiller ('07) works for a $500 million shop called International Forestry Investment Advisors. Bo White ('09) has researched forest-carbon-credit proposals for Papua New Guinea. Monica Araya, who earned a PhD from FES in '06, is now at $1.5 billion Climate Change Capital. The list goes on.
A whole generation of Yale's leading young environmentalists are becoming investors and analysts, with a faith in the power of capitalism that seems as idealistic as their passion for nature. "I love trees; they're so tangible!" says Kuppalli, who is now the U.S. director of New Forests, an Australian investment-management firm with $350 million in assets and capital commitments that develops carbon credits and other revenue from forests. "You can go somewhere and say [clapping her hands], 'There's my forest! There's my carbon!' "
For some, though, doubts have begun to seep in about what exactly their impact is. "Everyone can agree that maintaining forests is good for biodiversity, good for climate change; it's like apple pie," says Lex Hovani ('06), who is helping to create a national forest-carbon-credit program in Indonesia for the Nature Conservancy. "But then when you get into the details, people are starting to realize they're not always talking about the same thing."
The uncertainty looms especially large with forest-preservation projects. Under existing UN standards, you can create carbon credits by raising plantations of trees, as Forgach's firm is doing. But the destruction of the world's existing forests, particularly tropical forests, accounts for some 20% of greenhouse-gas emissions. So this past December, at the UN climate negotiations in Bali, a consensus coalesced around a proposed certification standard called Reduced Emissions from Deforestation and Degradation, or REDD. A REDD project involves buying forest land in a developing country, or making a deal with its owners, and creating a nature preserve. You attempt to prevent logging or slash-and-burn agriculture by hiring guards or offering the locals a better living doing something else. Then you sell carbon credits based on the deforestation thus avoided. The UN estimates that the market for REDD credits alone could reach $100 billion. According to a 2006 U.K. study, just 1.5 acres of tropical forest land could be worth as much as $25,000 in carbon credits at a CO2 price of $35 to $50 a ton. (The E.U. market price in May was $39.)
Forgach would prefer to see his trees turned into "fungible" carbon credits without a lot of regulatory hoo-ha. "I think forestry is a utility," he says. "Forest investments are tainted by NGOs that show the butterflies and the naked Indians." For others, though, the butterflies and natives are as much the point as global warming. Tropical forests are the world's richest centers of biodiversity, and more than a billion of the world's poorest people rely on them for fuel and food. Should REDD certification include requirements for biodiversity and sustainable development alongside carbon limits?
Rebelo believes so. A project she's working on in Mozambique includes training locals in forestry and providing seedlings for villagers to cultivate for firewood. "I'm doing what I've always wanted to do," she says. Yet she acknowledges that since the REDD discussions in Bali, new projects have been popping up so fast -- with locals and investors impatient to make money from carbon -- that well-rounded development programs are harder to execute. "It was all ass backward," she says. "It all just moved really fast." Today, she's helping to manage and develop more than 750,000 acres of forest in Indonesia and Africa for various European companies and nonprofits. "We're seeing a big series of field expansions -- massive projects all over the world. Between January and the end of March, I don't think I spent more than seven nights in one place."
The United States is responsible for about a fifth of the world's greenhouse-gas emissions. A serious carbon cap here at home -- 80% below 1990 levels by 2050 is widely considered the minimum to avoid the worst consequences of global warming -- is therefore crucial. Yet the rising clamor that we do something, anything, about greenhouse gases has swamped debate about what that something should be. The success of the American cap-and-trade system for acid rain is held up as proof that market dynamics can take care of our global carbon problem. But there are differences between acid rain and carbon.
The system for acid rain worked in part because the trading of credits was limited to a set of industrial polluters in one country. They exchanged permits to emit the gases among themselves -- and under the auspices of a then-powerful Environmental Protection Agency and effective courts. In other words, it was more or less a closed, monitored system.
But global warming is, of course, a transnational problem. And the attempt to create a global carbon market by using offsets in developing countries makes the whole system infinitely more porous. Even assuming that new emission standards are laid down here in the United States, allowing companies to outsource their compliance to the planet's hinterlands means that we are making rules vastly more difficult -- if not impossible -- to enforce. As Rebelo says, "These are all developing countries with poor governance structures and a lot of corruption."
Plus, the more offsets a company like AES creates in faraway lands, the less it invests in upgrading or replacing its coal-fired power plants here at home, as it might if it had to pay a carbon tax or reduce its emissions directly. That's why rich corporations are so interested in offsets in the first place -- they're less of a threat to business as usual.
The clock is ticking. The Intergovernmental Panel on Climate Change (IPCC), the scientists who along with Al Gore took home the Nobel Prize last year, are saying we have until 2009 at the latest to put a serious curb on emissions. That's next year. In Europe, where they're still tweaking the cap-and-trade model after three years, the scheme has not significantly cut carbon emissions; the price of carbon even crashed in April 2006, partly because too many credits were handed out.
It should be cause for concern that not a single person interviewed for this article, on either the investment or the carbon-project side, would assert with confidence that the rules currently being written for a U.S. cap-and-trade market will actually reduce overall carbon emissions. When it comes to carbon forestry especially, the simple economics just may not work out. "People are suddenly starting to see that carbon forestry is not the silver bullet," Rebelo says. "There's this big idea that it's going to save the world's forests, and I don't think it is. Carbon credits are one revenue stream among many. It's never going to counteract logging or oil-palm conversion." China, for example, is leveling Southeast Asian rainforests and planting oil-palm plantations to feed its ravenous appetite for biofuel. "I was looking at a potential project in Papua New Guinea," Rebelo explains. "Carbon credits could produce maybe $100 to $150 per hectare per year versus logging at $500 to $600, or conversion to oil palms, which is even higher."
"I haven't seen meta-analysis that says, 'Yes, this is working,' " says Bo White, who is founding a new company with Rebelo and another FES grad to sell carbon offsets to U.S. consumers. "I think it's really important to find ways of determining if these markets are actually helping the problem or just transferring money from here to there."
When Schwarzenegger was asked to speak at the Yale Conference of Governors on Climate Change in April, the occasion was billed as a "celebration of state environmental leadership." In the end, though, it became as much an indictment of the federal government's failure to act on global warming. For all of Schwarzenegger's free-market nods, California's environmental success has hinged on tough, activist regulations that forced businesses to adapt -- and not the messy, self-interested dynamics of a market. Markets may be the most powerful forces in our society, but they are hard to control. The long-term impact of a market in carbon is impossible to predict.
Yet that seems to be the only course offered by our national leaders. Today, the smart money is anticipating a legal carbon cap and thus a formal U.S. offset market not long after 2010. That transformation can only be compared with what started when Anthony Lucas struck oil at Spindletop a century ago. That black gusher eventually gave birth to the world's biggest multinational corporations; this green version is set to transform not only the energy sector but the way business is done, period. Here's hoping the kids at the core of this new green market, from Yale and elsewhere, figure out how to make it work.
Article location:http://www.fastcompany.com/magazine/127/carbon-boom.html
June 23, 2008
Camille Rebelo talks fast, with an intimidating British accent. The Kenyan-raised daughter of an Indian father and English mother, she's back from Indonesia and on her way to Mozambique when we meet at a coffeehouse near Yale University, where she earned a master's from the School of Forestry & Environmental Studies last year. Rebelo's devotion to tropical forests dates to her gap year after high school, which she spent doing wildlife surveys and sleeping in a hammock in Belize. "I went to university to study biology and figured I wanted to be back in a forest as soon as possible," she says.
But today she's no pith-helmeted biologist or furry eco-warrior eking out a living at a nonprofit. Instead, Rebelo has joined an elite for-profit field that barely existed eight months ago: carbon forestry. "I focused my courses at Yale around independent studies to look into this stuff," she says. "Back then, in 2005, it was still unknown." Now, "it's growing like crazy, and pretty much any forestry student you speak to at the moment wants to do [carbon credits]." In fact, a network of recent Yale forestry grads like Rebelo, many of them with joint MBAs, have been finding careers in the unlikely worlds of hedge funds, private equity, asset management, and corporate consulting. They are exerting tremendous influence over the brand-new market in greenhouse-gas credits, which is projected to reach $1 trillion in the United States alone. The work is prestigious, it's trendy, and it's surprisingly well paid. "I'm making five times what I ever thought I'd be making as a tropical forester," Rebelo says.
The word "forester" evokes a spotted-owl census taker or maybe Julia Butterfly Hill camped in a redwood. And in the course of its history, stretching back over a century to the early days of the National Park Service, Yale's School of Forestry & Environmental Studies (FES) has pumped plenty of those types out into the world. But as another recent grad explains, "There aren't nearly as many communists in the forestry school as there were 20 years ago." Maybe money really does grow on trees.
"Capitalism, long the alleged enemy of the environment, is today giving new life to the environmental movement." That was one of California Governor Arnold Schwarzenegger's applause lines at a speech he gave at Yale this past April. It's also the basic philosophy behind cap-and-trade policies -- that government should set the rules and step back, letting a market emerge, as the best way to fight global warming.
The theory is that the invisible hand of the markets will find the fastest, cheapest, most efficient way to make the necessary reductions in greenhouse gases. Under a cap-and-trade system, pioneered in the United States for acid rain, a government sets a national ceiling on emissions (the cap), which lowers annually. The clever CEO will, in principle, figure out a way to reduce her company's emissions to below her allotment. By carefully measuring how much carbon dioxide she's saving, she can sell the difference to someone who is unable or unwilling to meet his own goal (the trade).
In Europe, legal limits to greenhouse gases were put in place under the United Nations' Kyoto climate treaty, which the United States refused to sign; the resulting cap-and-trade market, launched in 2005, is the world's biggest. No such cap exists in U.S. law -- yet. But with both John McCain and Barack Obama publicly endorsing cap and trade and several bills circulating in Congress outlining different models, U.S. companies are beginning to see that legal limits on carbon are simply a matter of time. Looking to shape national policy, a coalition of powerful corporations -- heavy hitters such as Alcoa, BP America, GE, and Shell -- have formed the United States Climate Action Partnership, joining with big enviro organizations to lobby for cap and trade. To get a jump on potential liability, U.S. companies are buying carbon credits in anticipation, creating a voluntary carbon-offset market here.
The likes of Goldman Sachs, JPMorgan, and Morgan Stanley, along with specialized environmental-investment firms such as EcoSecurities and Natsource, have begun buying, selling, managing, and advising on hundred-million-dollar portfolios of carbon-offset projects. They're developing an array of sophisticated financial instruments that can be bundled, sliced, and swapped -- with each transaction bringing in a tidy fee. U.S. trade in offsets doubled in 2005 and 2006, and nearly tripled in 2007 to a total of $330 million. The worldwide market in carbon, dominated by Europe, already tops $64 billion.
In the speculative frenzy of a market like this, just as with the dotcom boom 10 years ago, the paradox is that the leading experts tend to be kids in their twenties fresh out of grad school. While Michigan's and Duke's programs are players too, Yale grads are at the top of that list. "When I go to these carbon conferences, if eight names are mentioned, maybe six of them are joint degree or FES," says Radha Kuppalli, a 30-year-old Yale FES grad with an MBA. Kuppalli's career stretches back about as far as the carbon market itself. Just out of college in 2002, she worked at Natsource, where she helped write the World Bank's official annual report on the carbon market. "Back then, it was small enough that you could follow every single trade," she says. Now, she tells me with a wide, excited grin, "we're really market leading -- we're making this stuff up as we go along."
The idea of carbon credits can be traced through a single corporation, AES, one of the world's largest power companies. Back in the late 1980s, AES began planting trees and preserving existing forests in Central America, and calculating the CO2 that would be absorbed from the air as a result. "We did those as social-responsibility projects," says Bill Lyons, now president of AES's Climate Solutions Business, "before Kyoto was a twinkle in anybody's eye." By last year, the company had entered into a partnership with GE to bring the largest single portfolio of carbon credits to market: 10 million tons, expected to grow to 34 million by 2012. The credits come from offset projects around the world, including trapping methane from animal waste, landfill gas, and palm-oil mill effluent; lighting efficiency (in India); and coal-mine ventilation (in Africa and Asia). "We view this as a long-term business," Lyons says.
How does a lagoon of cow manure become a ton of internationally tradable carbon? Through a combination of experimental finance and experimental project development -- all dreamed up and implemented by supersmart, often Yale-trained, ecologists. Rebelo, for example, works as an independent consultant for power and timber companies. Her clients are buying or planting huge tracts of trees, calculating the amount of carbon they absorb from the atmosphere each year, and then certifying that "removed" carbon as credits, one ton at a time. "My role is the carbon," she says. "I do all the baseline studies, put the methodology together, and do the monitoring and documentation required for certification."
The trickiest part comes in the third-party verification, to which all such projects must submit. In setting the "baseline," Rebelo must prove that the tree she's "saving" would otherwise be cut down. She must also somehow ensure that saving one tree won't lead to two trees being cut down somewhere else and that a tree she is saving one year won't burn down the next. Such assumptions suggest why some observers distrust the offset concept altogether: There's a lot of room to fudge.
Yale forestry grads didn't go from counting Ponderosa pines to pricing risk overnight. They needed shrewd businesspeople to open their eyes to the larger opportunity -- people such as John Forgach. A Brazilian millionaire with a courtly manner, Forgach spent three years teaching at FES, just as the international carbon market was heating up, and his classes, especially a business-plan class he taught with the former head of private equity at JPMorgan, were oversubscribed. He was considered a "bit of an itinerant preacher," as one of his former students puts it, whose sermons focused on the glories to be won by combining environmental expertise with financial acumen. And through his connections in international finance, industry, government, and academia (he has also taught at the London School of Economics and Madrid's Instituto de Empresa), Forgach helped get a few dozen students, including Kuppalli, jobs or internships. The FES and joint-degree MBA grads who sat in his classes are now in Argentina, Brazil, Ecuador, Indonesia, Papua New Guinea, and South Africa, brokering carbon deals.
Forgach traded oil before he traded trees. In fact, he made millions selling oil and petro-products all over West Africa, so it should come as no surprise that his interest in carbon is more than ecological. Still, he has abundant charisma and enough lefty patter to win over most Yalies. (Full disclosure: I too graduated from Yale, but not the FES.) "I was a philosophy student in Paris in '68, on the barricades," he tells me over lunch at an Indian restaurant. "Then I went to Harvard for my BA; we invaded the administration building and set on fire a few other things." Unlike most counterculture heroes, Forgach studied finance with John Kenneth Galbraith and government with Henry Kissinger, and moved on to a post in commodities trading with the famously Clinton-pardoned Mark Rich, leaving before there were any indictments. "I come from a very old European family," he says. "They paid for my education, but my fortune I made myself under the old moral standards -- meaning, you take the most advantage of all the hanky-panky in business and government."
In 1994, ensconced in his estate on Lake Geneva, Forgach had a midlife crisis. He'd discovered that "my friends were just friends of my assets," so after nearly 30 years as an expatriate, he returned to Brazil to devote himself to his passion for tropical birds. While founding sanctuaries for macaws rescued from international trafficking, he discovered the still-nascent concepts of sustainable forestry and environmental investing, and ended up managing the first World Bank biodiversity venture fund. The plug was pulled at the start of the Iraq War (thanks, he says, to "that ass in the White House"), but immediately afterward, his friend Gus Speth, the dean of Yale's FES, offered him a teaching fellowship. "My job was to be a trampoline for these students," Forgach says. "Before, the environment-school guys would graduate as biologists in the fields with the butterflies. And the business-school guys, all they wanted to do was make a killing at a hedge fund and buy a house in Greenwich. This program put a heart in the business executive and a head on the forestry-school guy."
Forgach himself seems to possess both a head and a heart, but ultimately, he emphasizes, he's a banker. "My argument is that we in business are the best equipped to handle these issues. The environment was much too serious a business to give to a bunch of bureaucrats who couldn't get a job in the real world," he says. "And I have a big bone to grind with [nonprofits]. They are interested in doing Indiana Jones in the forest, which is much more fun than shaping consumer opinions."
It's no surprise that his former students volunteer statements such as, "I don't think wealth is inherently bad. I philosophically feel like, unless markets value the environment, it will be destroyed," as Kuppalli puts it. Says another Forgach disciple from Yale, now in private equity: "True sustainability has to depend on economic performance."
Forgach helped goose the growth of the carbon market by populating the field with like-minded, energetic evangelists. And then he followed them back into the marketplace. "I was getting bored [at Yale]," he says, "and I was getting poor." When Baker & McKenzie, a leading international law firm, came to FES on behalf of a client looking for experienced environmental executives to start up a carbon business, Forgach stepped forward. He's now the chair of a private-equity firm, Equator Environmental, with a $170 million fund for sustainable forestry assets, including carbon credits from timber. "These Baker & McKenzie guys half my age said, 'The environment? This is ninny business for faggots and fairies. For girls.' I said, 'No, this is the future. If you don't do it, you'll be out of business.' "
With sons and daughters of Eli at the heart of the emerging carbon markets, one of the clear beneficiaries is Yale itself. While Harvard may lead its rival in the size of its endowment, Yale has staked a claim as the green Ivy of the future. The school has a brand-new Center for Business and the Environment and a high-profile campus-sustainability initiative, and president Richard Levin is being honored worldwide as an environmental leader. Yale's new philosophy could be summarized by the title of the best-selling book by Daniel Esty, founding director of the Center for Business and the Environment: Green to Gold. (Esty himself serves as a paid consultant for corporations such as BP, Coca-Cola, Honeywell, Shell, and Unilever.) "Our program at Yale reflects an understanding that the critical point of leverage for management of natural resources is the business world," Esty tells me. "I think it's very exciting to see how students are jumping right into that space."
Katherine Hamilton (FES class of '06) is the carbon-market manager at financial-information firm Ecosystem Marketplace, the Bloomberg of the carbon market. Kevin Tidwell ('06) is an associate at the Global Environment Fund, which is making several $30 million to $60 million investments in South American and African forests. Marc Hiller ('07) works for a $500 million shop called International Forestry Investment Advisors. Bo White ('09) has researched forest-carbon-credit proposals for Papua New Guinea. Monica Araya, who earned a PhD from FES in '06, is now at $1.5 billion Climate Change Capital. The list goes on.
A whole generation of Yale's leading young environmentalists are becoming investors and analysts, with a faith in the power of capitalism that seems as idealistic as their passion for nature. "I love trees; they're so tangible!" says Kuppalli, who is now the U.S. director of New Forests, an Australian investment-management firm with $350 million in assets and capital commitments that develops carbon credits and other revenue from forests. "You can go somewhere and say [clapping her hands], 'There's my forest! There's my carbon!' "
For some, though, doubts have begun to seep in about what exactly their impact is. "Everyone can agree that maintaining forests is good for biodiversity, good for climate change; it's like apple pie," says Lex Hovani ('06), who is helping to create a national forest-carbon-credit program in Indonesia for the Nature Conservancy. "But then when you get into the details, people are starting to realize they're not always talking about the same thing."
The uncertainty looms especially large with forest-preservation projects. Under existing UN standards, you can create carbon credits by raising plantations of trees, as Forgach's firm is doing. But the destruction of the world's existing forests, particularly tropical forests, accounts for some 20% of greenhouse-gas emissions. So this past December, at the UN climate negotiations in Bali, a consensus coalesced around a proposed certification standard called Reduced Emissions from Deforestation and Degradation, or REDD. A REDD project involves buying forest land in a developing country, or making a deal with its owners, and creating a nature preserve. You attempt to prevent logging or slash-and-burn agriculture by hiring guards or offering the locals a better living doing something else. Then you sell carbon credits based on the deforestation thus avoided. The UN estimates that the market for REDD credits alone could reach $100 billion. According to a 2006 U.K. study, just 1.5 acres of tropical forest land could be worth as much as $25,000 in carbon credits at a CO2 price of $35 to $50 a ton. (The E.U. market price in May was $39.)
Forgach would prefer to see his trees turned into "fungible" carbon credits without a lot of regulatory hoo-ha. "I think forestry is a utility," he says. "Forest investments are tainted by NGOs that show the butterflies and the naked Indians." For others, though, the butterflies and natives are as much the point as global warming. Tropical forests are the world's richest centers of biodiversity, and more than a billion of the world's poorest people rely on them for fuel and food. Should REDD certification include requirements for biodiversity and sustainable development alongside carbon limits?
Rebelo believes so. A project she's working on in Mozambique includes training locals in forestry and providing seedlings for villagers to cultivate for firewood. "I'm doing what I've always wanted to do," she says. Yet she acknowledges that since the REDD discussions in Bali, new projects have been popping up so fast -- with locals and investors impatient to make money from carbon -- that well-rounded development programs are harder to execute. "It was all ass backward," she says. "It all just moved really fast." Today, she's helping to manage and develop more than 750,000 acres of forest in Indonesia and Africa for various European companies and nonprofits. "We're seeing a big series of field expansions -- massive projects all over the world. Between January and the end of March, I don't think I spent more than seven nights in one place."
The United States is responsible for about a fifth of the world's greenhouse-gas emissions. A serious carbon cap here at home -- 80% below 1990 levels by 2050 is widely considered the minimum to avoid the worst consequences of global warming -- is therefore crucial. Yet the rising clamor that we do something, anything, about greenhouse gases has swamped debate about what that something should be. The success of the American cap-and-trade system for acid rain is held up as proof that market dynamics can take care of our global carbon problem. But there are differences between acid rain and carbon.
The system for acid rain worked in part because the trading of credits was limited to a set of industrial polluters in one country. They exchanged permits to emit the gases among themselves -- and under the auspices of a then-powerful Environmental Protection Agency and effective courts. In other words, it was more or less a closed, monitored system.
But global warming is, of course, a transnational problem. And the attempt to create a global carbon market by using offsets in developing countries makes the whole system infinitely more porous. Even assuming that new emission standards are laid down here in the United States, allowing companies to outsource their compliance to the planet's hinterlands means that we are making rules vastly more difficult -- if not impossible -- to enforce. As Rebelo says, "These are all developing countries with poor governance structures and a lot of corruption."
Plus, the more offsets a company like AES creates in faraway lands, the less it invests in upgrading or replacing its coal-fired power plants here at home, as it might if it had to pay a carbon tax or reduce its emissions directly. That's why rich corporations are so interested in offsets in the first place -- they're less of a threat to business as usual.
The clock is ticking. The Intergovernmental Panel on Climate Change (IPCC), the scientists who along with Al Gore took home the Nobel Prize last year, are saying we have until 2009 at the latest to put a serious curb on emissions. That's next year. In Europe, where they're still tweaking the cap-and-trade model after three years, the scheme has not significantly cut carbon emissions; the price of carbon even crashed in April 2006, partly because too many credits were handed out.
It should be cause for concern that not a single person interviewed for this article, on either the investment or the carbon-project side, would assert with confidence that the rules currently being written for a U.S. cap-and-trade market will actually reduce overall carbon emissions. When it comes to carbon forestry especially, the simple economics just may not work out. "People are suddenly starting to see that carbon forestry is not the silver bullet," Rebelo says. "There's this big idea that it's going to save the world's forests, and I don't think it is. Carbon credits are one revenue stream among many. It's never going to counteract logging or oil-palm conversion." China, for example, is leveling Southeast Asian rainforests and planting oil-palm plantations to feed its ravenous appetite for biofuel. "I was looking at a potential project in Papua New Guinea," Rebelo explains. "Carbon credits could produce maybe $100 to $150 per hectare per year versus logging at $500 to $600, or conversion to oil palms, which is even higher."
"I haven't seen meta-analysis that says, 'Yes, this is working,' " says Bo White, who is founding a new company with Rebelo and another FES grad to sell carbon offsets to U.S. consumers. "I think it's really important to find ways of determining if these markets are actually helping the problem or just transferring money from here to there."
When Schwarzenegger was asked to speak at the Yale Conference of Governors on Climate Change in April, the occasion was billed as a "celebration of state environmental leadership." In the end, though, it became as much an indictment of the federal government's failure to act on global warming. For all of Schwarzenegger's free-market nods, California's environmental success has hinged on tough, activist regulations that forced businesses to adapt -- and not the messy, self-interested dynamics of a market. Markets may be the most powerful forces in our society, but they are hard to control. The long-term impact of a market in carbon is impossible to predict.
Yet that seems to be the only course offered by our national leaders. Today, the smart money is anticipating a legal carbon cap and thus a formal U.S. offset market not long after 2010. That transformation can only be compared with what started when Anthony Lucas struck oil at Spindletop a century ago. That black gusher eventually gave birth to the world's biggest multinational corporations; this green version is set to transform not only the energy sector but the way business is done, period. Here's hoping the kids at the core of this new green market, from Yale and elsewhere, figure out how to make it work.
Article location:http://www.fastcompany.com/magazine/127/carbon-boom.html
June 23, 2008
Sunday, May 4, 2008
Smarter electric grid could be key to saving power
By BRIAN BERGSTEIN (May 4, 3:38 AM EDT)
MILTON, Ontario (AP) -- The glowing amber dot on a light switch in the entryway of George Tsapoitis' house offers a clue about the future of electricity.
A few times this summer, when millions of air conditioners strain the Toronto region's power grid, that pencil-tip-sized amber dot will blink. It will be asking Tsapoitis to turn the switch off - unless he's already programmed his house to make that move for him.
This is the beginning of a new way of thinking about electricity, and the biggest change in how we get power since wires began veining the landscape a century ago.
For all the engineering genius behind the electric grid, that vast network ferrying energy from power plants through transmission lines isn't particularly smart when it meets our homes. We flip a switch or plug something in and generally get as much power as we're willing to pay for.
But these days the environmental consequences and unfriendly economics of energy appear unsustainable. As a result, power providers and technology companies are making the electric grid smarter.
It will stop being merely a passive supplier of juice. Instead, power companies will be able to cue us, like those amber lights in Tsapoitis' house, to make choices about when and how we consume power. And most likely, we'll have our computers and appliances carry out those decisions for us.
Done right, the smarter grid should save consumers money in the long run by reducing the need for new power plants, which we pay off in our monthly electric bills. However, if people fail to react properly to conservation signals, their bills could spike.
And certainly a smart grid that can encourage us to conserve will feel different. Envision your kitchen appliances in silent communication with their power source: The fridge bumps its temperature up a degree on one day, and the dishwasher kicks on a bit later on another.
Smart-grid technologies have gotten small tests throughout North America, as utilities and regulators scout how to coax people to reduce their demand for power. But there's little doubt it's coming. The utility Xcel Energy Inc. plans to soon begin a $100 million smart grid project reaching 100,000 homes in Boulder, Colo.
In Milton, an exurb where dense subdivisions encroach on farm fields, a test with the Tsapoitis family and 200 other households reveals what will be possible - and how much more work needs to happen.
Tsapoitis uses his computer to visit an online control panel that configures his home's energy consumption. He chooses its temperature and which lights should be on or off at certain times of the day. He can set rules for different kinds of days, so the house might be warmer and darker on summer weekdays when his family is out.
The family can override those changes manually, whether it's by turning on the porch light or raising the thermostat to ward off a Canadian chill. But the system guards against waste. If midnight comes and no one has remembered to lower the thermostat and turn off the porch light, those steps just happen.
These little tweaks add up nicely for another person testing the Milton system, Marian Rakusan. He's saved at least $300 on utility bills since the program began in September. Tsapoitis and his wife, Lisa, aren't certain of their savings but say their 2,400-square-foot home has lower energy bills than a friend's 1,800-square-footer.
This alone is not revolutionary, because programmable thermostats and other "smart home" controls let people craft similar resource-saving plans. The big change here is the combination of these controls with that blinking amber light on the switch - where the grid talks back.
Milton's local gas and electricity retailer, Direct Energy, will set those amber dots blinking in an emergency. It might happen a few times in a summer month. Maybe there will be congestion in Ontario's overtaxed transmission network. Perhaps a power plant will be down for maintenance. Or rapacious air conditioners will overwhelm electric capacity.
Whatever the cause, at that moment, this section of the grid needs a reduction in demand, fast, or else outages loom.
People in Milton's test are expected to configure a "brownout" setting on their computers, indicating how their homes should respond in such a situation. In this test, Direct Energy also will enforce conservation remotely. It can raise the set temperature in a participant's home by 2 degrees Celsius in the summer (nearly 4 degrees Fahrenheit), reducing its air conditioning load. The company also has permission to shut off the testers' hot-water heaters and electric pool pumps for four hours at time during these power emergencies.
Tsapoitis shrugs at that aspect of the arrangement. It's better than rolling blackouts. Rakusan, however, says he's not sure he likes the idea of the power company tweaking his home's settings.
Indeed, it appears unlikely that broad swaths of the public will accept remote control from the power company. California officials recently had to back away from a proposal to require remote-controlled thermostats in new buildings.
So a more likely scenario is that consumers will get powerful economic incentives to make those decisions themselves.
Typically we pay a flat rate for electricity, even if sometimes it falls below the actual costs of supplying power at a given moment. In a growing number of places, rates move slightly higher in hours that typically are busiest.
An advanced notion of this will be tested this summer in 1,100 homes served by Baltimore Gas & Electric. Pricing plans will vary, but generally the households will pay the cheapest, "off-peak" rates most of the time. Some testers will pay higher rates every weekday afternoon. And all of them will be subject to "critical peak" periods of even higher charges, declared on as many as 12 weekday afternoons with stress on the grid.
The Maryland utility will have its own version of Milton's amber dots. Most of the homes will get 3-inch-high orbs that will glow different colors to indicate the price of electricity: red instead of their usual green, for example, during critical peak periods.
Even this will probably be a primitive step.
Eventually, the smart grid will let rates fluctuate even more dynamically, depending on conditions. That already happens in wholesale electricity markets, in which power suppliers buy energy from power producers. Now that would extend to the retail level - our homes. The price of electricity would dip when demand is softest, typically at night or on mild days, and rise in periods of strain.
There's only one problem. "Consumers are not sitting at home waiting for the latest signal from the power grid," says Rob Pratt, a scientist with the Department of Energy's Pacific Northwest National Laboratory. "To get the kind of widespread response that we'd really like to have, keeping it automatic is real important."
In other words, appliances designed to interact with the smarter electric grid will adjust themselves.
Pratt's lab has already built and tested controllers that can make it happen. And over the next decade, Pratt expects homes to get appliance controls with a sliding scale. At one end people could choose something like "maximize my ease and comfort." At the other, "save me the maximum amount of money." The highest-conservation settings might lead dishwashers to start only when electricity prices are at their lowest, or when wind power has kicked on.
When Pratt and colleagues tested aspects of this in 112 homes in Washington state, they determined the average household's electricity bills would drop 10 percent.
It says a lot that conservation would be encouraged by the very companies that make money off the use of electricity. But they have no real choice.
Electricity use per home rose 23 percent from 1981 to 2001, according to the Department of Energy. Blame increases in electronics and appliances, and our decreasing tolerance for sweating through the summers. The Census Bureau says 46 percent of single-family homes completed in the U.S. in 1975 had air conditioning. In 2006 that was 89 percent.
Meanwhile, meeting that demand is getting trickier. Raw materials that fuel power plants are soaring in price and being eyed more skeptically by regulators concerned about air quality and greenhouse gases. And that's even before the next U.S. president, as seems likely, supports caps on carbon emissions.
"We just can't keep building more coal plants," says Roy Palmer, head of regulatory affairs at Xcel Energy.
So until some bountiful and clean power source can be delivered cheaply, electric utilities are pressured to extend the generating capacity we already have.
The effects of well-chosen reductions in usage - an idea known as "demand response" - can be huge. A mere 5 percent improvement in U.S. electric efficiency would prevent 90 large coal-fired power plants from having to be built over the next 20 years, according to Jon Wellinghoff, a member of the Federal Energy Regulatory Commission who advocates demand response.
Demand response isn't new, but it's existed in low-tech form. Utilities in capacity crunches would call companies and request that they do something to help, like idling an assembly line for a few hours. In some states, residents can get rebates if they let the utility trigger radio transmitters on their air conditioners that cycle the chillers off for a few minutes in strained summer hours.
Now though, technology can do demand response in a more sophisticated way.
Companies such as EnerNOC Inc. have built software and sensor networks that can remotely dim lights or raise refrigerator temperatures inside businesses, in an instant. For homes, upgraded electric meters can offer near-real-time feedback on energy use. And new generations of appliances and thermostats can coordinate with each other and electric meters over in-home wireless networks.
The key hurdle is figuring out how to pay for it all.
The equipment in Milton's tests costs more than $1,000 per house. That will come down with larger-scale efforts, and utilities will save money as networked meters free them from sending out human meter readers each month. But for bigger smart-grid investments, energy companies generally want regulators to let them recoup the costs through higher electric rates. That can get thorny.
Tsapoitis hopes some kind of smarter system sticks after his test ends in Milton this fall. When asked why he signed up, he said it might keep his 4-year-old son, Brogan, from worrying about global warming and other environmental threats. He pointed to a tattoo running down his arm that spells out Brogan's name in an Old English font.
"That," he said, "is what we do it for."
MILTON, Ontario (AP) -- The glowing amber dot on a light switch in the entryway of George Tsapoitis' house offers a clue about the future of electricity.
A few times this summer, when millions of air conditioners strain the Toronto region's power grid, that pencil-tip-sized amber dot will blink. It will be asking Tsapoitis to turn the switch off - unless he's already programmed his house to make that move for him.
This is the beginning of a new way of thinking about electricity, and the biggest change in how we get power since wires began veining the landscape a century ago.
For all the engineering genius behind the electric grid, that vast network ferrying energy from power plants through transmission lines isn't particularly smart when it meets our homes. We flip a switch or plug something in and generally get as much power as we're willing to pay for.
But these days the environmental consequences and unfriendly economics of energy appear unsustainable. As a result, power providers and technology companies are making the electric grid smarter.
It will stop being merely a passive supplier of juice. Instead, power companies will be able to cue us, like those amber lights in Tsapoitis' house, to make choices about when and how we consume power. And most likely, we'll have our computers and appliances carry out those decisions for us.
Done right, the smarter grid should save consumers money in the long run by reducing the need for new power plants, which we pay off in our monthly electric bills. However, if people fail to react properly to conservation signals, their bills could spike.
And certainly a smart grid that can encourage us to conserve will feel different. Envision your kitchen appliances in silent communication with their power source: The fridge bumps its temperature up a degree on one day, and the dishwasher kicks on a bit later on another.
Smart-grid technologies have gotten small tests throughout North America, as utilities and regulators scout how to coax people to reduce their demand for power. But there's little doubt it's coming. The utility Xcel Energy Inc. plans to soon begin a $100 million smart grid project reaching 100,000 homes in Boulder, Colo.
In Milton, an exurb where dense subdivisions encroach on farm fields, a test with the Tsapoitis family and 200 other households reveals what will be possible - and how much more work needs to happen.
Tsapoitis uses his computer to visit an online control panel that configures his home's energy consumption. He chooses its temperature and which lights should be on or off at certain times of the day. He can set rules for different kinds of days, so the house might be warmer and darker on summer weekdays when his family is out.
The family can override those changes manually, whether it's by turning on the porch light or raising the thermostat to ward off a Canadian chill. But the system guards against waste. If midnight comes and no one has remembered to lower the thermostat and turn off the porch light, those steps just happen.
These little tweaks add up nicely for another person testing the Milton system, Marian Rakusan. He's saved at least $300 on utility bills since the program began in September. Tsapoitis and his wife, Lisa, aren't certain of their savings but say their 2,400-square-foot home has lower energy bills than a friend's 1,800-square-footer.
This alone is not revolutionary, because programmable thermostats and other "smart home" controls let people craft similar resource-saving plans. The big change here is the combination of these controls with that blinking amber light on the switch - where the grid talks back.
Milton's local gas and electricity retailer, Direct Energy, will set those amber dots blinking in an emergency. It might happen a few times in a summer month. Maybe there will be congestion in Ontario's overtaxed transmission network. Perhaps a power plant will be down for maintenance. Or rapacious air conditioners will overwhelm electric capacity.
Whatever the cause, at that moment, this section of the grid needs a reduction in demand, fast, or else outages loom.
People in Milton's test are expected to configure a "brownout" setting on their computers, indicating how their homes should respond in such a situation. In this test, Direct Energy also will enforce conservation remotely. It can raise the set temperature in a participant's home by 2 degrees Celsius in the summer (nearly 4 degrees Fahrenheit), reducing its air conditioning load. The company also has permission to shut off the testers' hot-water heaters and electric pool pumps for four hours at time during these power emergencies.
Tsapoitis shrugs at that aspect of the arrangement. It's better than rolling blackouts. Rakusan, however, says he's not sure he likes the idea of the power company tweaking his home's settings.
Indeed, it appears unlikely that broad swaths of the public will accept remote control from the power company. California officials recently had to back away from a proposal to require remote-controlled thermostats in new buildings.
So a more likely scenario is that consumers will get powerful economic incentives to make those decisions themselves.
Typically we pay a flat rate for electricity, even if sometimes it falls below the actual costs of supplying power at a given moment. In a growing number of places, rates move slightly higher in hours that typically are busiest.
An advanced notion of this will be tested this summer in 1,100 homes served by Baltimore Gas & Electric. Pricing plans will vary, but generally the households will pay the cheapest, "off-peak" rates most of the time. Some testers will pay higher rates every weekday afternoon. And all of them will be subject to "critical peak" periods of even higher charges, declared on as many as 12 weekday afternoons with stress on the grid.
The Maryland utility will have its own version of Milton's amber dots. Most of the homes will get 3-inch-high orbs that will glow different colors to indicate the price of electricity: red instead of their usual green, for example, during critical peak periods.
Even this will probably be a primitive step.
Eventually, the smart grid will let rates fluctuate even more dynamically, depending on conditions. That already happens in wholesale electricity markets, in which power suppliers buy energy from power producers. Now that would extend to the retail level - our homes. The price of electricity would dip when demand is softest, typically at night or on mild days, and rise in periods of strain.
There's only one problem. "Consumers are not sitting at home waiting for the latest signal from the power grid," says Rob Pratt, a scientist with the Department of Energy's Pacific Northwest National Laboratory. "To get the kind of widespread response that we'd really like to have, keeping it automatic is real important."
In other words, appliances designed to interact with the smarter electric grid will adjust themselves.
Pratt's lab has already built and tested controllers that can make it happen. And over the next decade, Pratt expects homes to get appliance controls with a sliding scale. At one end people could choose something like "maximize my ease and comfort." At the other, "save me the maximum amount of money." The highest-conservation settings might lead dishwashers to start only when electricity prices are at their lowest, or when wind power has kicked on.
When Pratt and colleagues tested aspects of this in 112 homes in Washington state, they determined the average household's electricity bills would drop 10 percent.
It says a lot that conservation would be encouraged by the very companies that make money off the use of electricity. But they have no real choice.
Electricity use per home rose 23 percent from 1981 to 2001, according to the Department of Energy. Blame increases in electronics and appliances, and our decreasing tolerance for sweating through the summers. The Census Bureau says 46 percent of single-family homes completed in the U.S. in 1975 had air conditioning. In 2006 that was 89 percent.
Meanwhile, meeting that demand is getting trickier. Raw materials that fuel power plants are soaring in price and being eyed more skeptically by regulators concerned about air quality and greenhouse gases. And that's even before the next U.S. president, as seems likely, supports caps on carbon emissions.
"We just can't keep building more coal plants," says Roy Palmer, head of regulatory affairs at Xcel Energy.
So until some bountiful and clean power source can be delivered cheaply, electric utilities are pressured to extend the generating capacity we already have.
The effects of well-chosen reductions in usage - an idea known as "demand response" - can be huge. A mere 5 percent improvement in U.S. electric efficiency would prevent 90 large coal-fired power plants from having to be built over the next 20 years, according to Jon Wellinghoff, a member of the Federal Energy Regulatory Commission who advocates demand response.
Demand response isn't new, but it's existed in low-tech form. Utilities in capacity crunches would call companies and request that they do something to help, like idling an assembly line for a few hours. In some states, residents can get rebates if they let the utility trigger radio transmitters on their air conditioners that cycle the chillers off for a few minutes in strained summer hours.
Now though, technology can do demand response in a more sophisticated way.
Companies such as EnerNOC Inc. have built software and sensor networks that can remotely dim lights or raise refrigerator temperatures inside businesses, in an instant. For homes, upgraded electric meters can offer near-real-time feedback on energy use. And new generations of appliances and thermostats can coordinate with each other and electric meters over in-home wireless networks.
The key hurdle is figuring out how to pay for it all.
The equipment in Milton's tests costs more than $1,000 per house. That will come down with larger-scale efforts, and utilities will save money as networked meters free them from sending out human meter readers each month. But for bigger smart-grid investments, energy companies generally want regulators to let them recoup the costs through higher electric rates. That can get thorny.
Tsapoitis hopes some kind of smarter system sticks after his test ends in Milton this fall. When asked why he signed up, he said it might keep his 4-year-old son, Brogan, from worrying about global warming and other environmental threats. He pointed to a tattoo running down his arm that spells out Brogan's name in an Old English font.
"That," he said, "is what we do it for."
Monday, April 14, 2008
Europe's EPA Advises Suspending Biofuel Targets : Gas 2.0
Today the European Environment Agency’s (EEA) Scientific Committee recommended suspending the EUs target for 10% biofuel usage by 2020, due to concerns that first-generation biofuels (those made from food crops) are environmentally unsound.
Back in 2003, the EU established a Biofuel Directive aimed at replacing 2% of vehicle fuel by 2005, and 5.75% by 2010. The 2005 goal wasn’t met, and despite uncertainty that the EU could even reach the 2010 targets, an ambitious goal of replacing 10% of total fuel usage by 2020 was put in place last year.
Now the EEA isn’t sure that’s such a good idea, and recommended the target be suspended until a new, comprehensive scientific study on the environmental risks and benefits of biofuels can be completed. The EEA expressed the following concerns:
* Producing biodiesel or ethanol out of plant material is not the most efficient or environmentally friendly use of biomass when compared to heat or electricity generation.
* Biomass is a finite resource, and using it should be matched with energy efficiency improvements in automobiles (and residential areas).
* The EEA estimated that the land required to meet the 10% target exceeds the amount of arable land available, even with substantial input by second-generation (non-food) feedstocks. Increasing land use will increase pressure on soil, water, and biodiversity.
* Meeting the target would require importing large amounts of biofuels, which could contribute to the accelerating destruction of rain forests in less developed countries.
Europe has been struggling with biofuel policies for some time now. Mandating biofuel targets without having sustainability filters in place may boost industry, but it won’t protect the land. The US is also struggling with biofuel policies and their impacts. See the related links for more:
Back in 2003, the EU established a Biofuel Directive aimed at replacing 2% of vehicle fuel by 2005, and 5.75% by 2010. The 2005 goal wasn’t met, and despite uncertainty that the EU could even reach the 2010 targets, an ambitious goal of replacing 10% of total fuel usage by 2020 was put in place last year.
Now the EEA isn’t sure that’s such a good idea, and recommended the target be suspended until a new, comprehensive scientific study on the environmental risks and benefits of biofuels can be completed. The EEA expressed the following concerns:
* Producing biodiesel or ethanol out of plant material is not the most efficient or environmentally friendly use of biomass when compared to heat or electricity generation.
* Biomass is a finite resource, and using it should be matched with energy efficiency improvements in automobiles (and residential areas).
* The EEA estimated that the land required to meet the 10% target exceeds the amount of arable land available, even with substantial input by second-generation (non-food) feedstocks. Increasing land use will increase pressure on soil, water, and biodiversity.
* Meeting the target would require importing large amounts of biofuels, which could contribute to the accelerating destruction of rain forests in less developed countries.
Europe has been struggling with biofuel policies for some time now. Mandating biofuel targets without having sustainability filters in place may boost industry, but it won’t protect the land. The US is also struggling with biofuel policies and their impacts. See the related links for more:
Saturday, April 5, 2008
Investor puts his money into the rainforest
Investor puts his money into the rainforest
* 18:38 27 March 2008
It is either a visionary piece of capitalism or throwing money into the wind. A venture capitalist today made a huge environmental bet – that one day the environment services that sustainable forests provide will be worth big money.
The Iwokrama reserve in Guyana is a 371,000 hectare chunk of tropical forest – roughly the size of Majorca – and is a successful experiment in sustainable forest management.
Hylton Murray-Philipson, director of the UK-based financiers Canopy Capital, has signed a deal with Iwokrama guaranteeing a "meaningful" contribution to their running costs for five years, a deal which may be renewed.
In return for these funds, Canopy Capital is given "ownership" of the forest's ecosystems services and a claim on any profits that might one day be made from them.
Zero deforestation
The value of the deal is undisclosed, but it is unprecedented. Murray-Philipson describes it as "creating wealth that is worth having".
Iwokrama is home to the same level of biodiversity as the neighbouring Brazilian Amazon but, unlike the Amazon, it is not disappearing. According to the UN Food and Agriculture Organization, between 2000 and 2005 the rate of deforestation in Guyana was 0%.
Logging in Guyana is selective, with only 35 of more than 1000 tree species logged commercially. The Iwokrama reserve itself operates a low level of logging equivalent of one tree per hectare each year on just half of its total surface.
Guyana's pristine forests as yet have no financial value. But they seed rain that irrigates farmlands as far away as the American Midwest, house thousands of species of plants and animals, including many rare ones, and store tonnes of carbon.
Unknown value
In November 2007, Guyana's president put his forests up for adoption in exchange for development aid. "What else has Guyana got to offer the global economy?" asks Murray-Philipson.
The trouble is, because of Guyana's excellent track record in forest conservation, no-one else seems to think the forests have any value.
"Let's not be idiots about these ecosystem services," says Niki Mardas of the Global Canopy Programme, "humans are getting a free ride." Mardas's organisation is a partner in the Canopy Capital deal and will receive 20% of any returns on the firm's investment.
Murray-Philipson reckons the forests are worth about $20 per hectare, although he admits he may never see a penny of return on his investment. He says the price tag is considerably less than what some companies are considering paying to store carbon under the sea.
'Winds of change'
Worked out in terms of carbon storage – the only ecosystem service to have some sort of value at the moment – it comes to $0.20 per tonne. Meanwhile, he notes that oil giant BP is looking at spending $50 to $60 a tonne on pumping carbon into disused oil fields in the North Sea.
"The winds of change have to blow through the canopy," Murray-Philipson says. "If I am wrong, we have a write-off, but at least we have tried to do something to change the paradigm of how man relates to nature."
"Rewarding people for good management is intrinsically more palatable than REDD [Reduced Emissions from Deforestation and Degradation] which rewards people for addressing a situation out of control," says Duncan MacQueen, a forestry expert at the Institute for Environment and Development in London, referring to a UN programme that was launched at the climate change summit in Bali, Indonesia, last December.
REDD aims to pay countries to reduce deforestation. The details need to be ironed out and the final agreement is not expected until 2009, but it looks unlikely that REDD will reward countries, like Guyana, that have a long-standing record for conserving their forests.
* 18:38 27 March 2008
It is either a visionary piece of capitalism or throwing money into the wind. A venture capitalist today made a huge environmental bet – that one day the environment services that sustainable forests provide will be worth big money.
The Iwokrama reserve in Guyana is a 371,000 hectare chunk of tropical forest – roughly the size of Majorca – and is a successful experiment in sustainable forest management.
Hylton Murray-Philipson, director of the UK-based financiers Canopy Capital, has signed a deal with Iwokrama guaranteeing a "meaningful" contribution to their running costs for five years, a deal which may be renewed.
In return for these funds, Canopy Capital is given "ownership" of the forest's ecosystems services and a claim on any profits that might one day be made from them.
Zero deforestation
The value of the deal is undisclosed, but it is unprecedented. Murray-Philipson describes it as "creating wealth that is worth having".
Iwokrama is home to the same level of biodiversity as the neighbouring Brazilian Amazon but, unlike the Amazon, it is not disappearing. According to the UN Food and Agriculture Organization, between 2000 and 2005 the rate of deforestation in Guyana was 0%.
Logging in Guyana is selective, with only 35 of more than 1000 tree species logged commercially. The Iwokrama reserve itself operates a low level of logging equivalent of one tree per hectare each year on just half of its total surface.
Guyana's pristine forests as yet have no financial value. But they seed rain that irrigates farmlands as far away as the American Midwest, house thousands of species of plants and animals, including many rare ones, and store tonnes of carbon.
Unknown value
In November 2007, Guyana's president put his forests up for adoption in exchange for development aid. "What else has Guyana got to offer the global economy?" asks Murray-Philipson.
The trouble is, because of Guyana's excellent track record in forest conservation, no-one else seems to think the forests have any value.
"Let's not be idiots about these ecosystem services," says Niki Mardas of the Global Canopy Programme, "humans are getting a free ride." Mardas's organisation is a partner in the Canopy Capital deal and will receive 20% of any returns on the firm's investment.
Murray-Philipson reckons the forests are worth about $20 per hectare, although he admits he may never see a penny of return on his investment. He says the price tag is considerably less than what some companies are considering paying to store carbon under the sea.
'Winds of change'
Worked out in terms of carbon storage – the only ecosystem service to have some sort of value at the moment – it comes to $0.20 per tonne. Meanwhile, he notes that oil giant BP is looking at spending $50 to $60 a tonne on pumping carbon into disused oil fields in the North Sea.
"The winds of change have to blow through the canopy," Murray-Philipson says. "If I am wrong, we have a write-off, but at least we have tried to do something to change the paradigm of how man relates to nature."
"Rewarding people for good management is intrinsically more palatable than REDD [Reduced Emissions from Deforestation and Degradation] which rewards people for addressing a situation out of control," says Duncan MacQueen, a forestry expert at the Institute for Environment and Development in London, referring to a UN programme that was launched at the climate change summit in Bali, Indonesia, last December.
REDD aims to pay countries to reduce deforestation. The details need to be ironed out and the final agreement is not expected until 2009, but it looks unlikely that REDD will reward countries, like Guyana, that have a long-standing record for conserving their forests.
Friday, March 7, 2008
Clean-tech VC investing tops $3 billion, but 'funding gap' looms
The numbers are in on clean-tech investing in 2007 and, once again, the direction is way up.
Dow Jones VentureSource on Friday said that venture capitalists plowed a record $3 billion last year in clean-tech companies, a 43 percent jump from the year before. The number of deals rose from 173 in 2006 to 221 last year.
"Our data shows that 59 percent of all U.S. investment in the sector is going toward companies in the product development phase, which suggests that funding for clean technologies is likely to continue as these companies continue to develop and start generating revenues," said Jessica Canning, director of global research, in a statement.
The median deal size in the U.S went up slightly to $8 million, which is a bit higher than all industries.
The biggest raising last year was $200 million for Project Better Place, the Shai Agassi-led company to set up a network of services stations with batteries for electric cars.
U.S.-based firms caught the lion's share of the money, with 83 percent of the global total. The total in the U.S. was $2.52 billion in 2007, a 79 percent increase.
Europe, led by Spain and Germany, saw a 27 percent increase to $360 million in venture capital. China, meanwhile, saw venture investing fall nearly 70 percent to $129 million, although four venture-backed companies went public.
So is this outpouring of venture dollars all good news for energy and environment entrepreneurs? Not entirely.
There is ongoing concern that certain areas within clean tech, notably solar and biofuels, are becoming an over-heated financial bubble that cannot sustain the influx of new companies.
This is a typical pattern of large investment waves, which are often followed by consolidation among companies and company failures.
More specific to clean tech is a funding gap, sometimes referred to as the "Valley of Death."
Unlike software or medical devices, energy-related companies require large amounts of capital to prove out their technology as cost-effective. A biofuels plant, for example, can cost more than $100 million--beyond the funding venture capitalists are able to do. Project financiers typically back only well proven technologies, as a report by Ernst & Young noted. Click here for PDF.
Ernst & Young recommends looking to government sources of money, reducing technology risk, and using debt selectively for financing.
Despite this funding challenge and regulatory hurdles, Dow Jones VentureSource sees significant potential. Both consumers and businesses are interested in buying eco-conscious products and, because the energy business is so big, gaining a small amount of market share from incumbents can be very profitable.
"The biggest factor driving investment in clean tech today is the huge consumer outcry for change," contends Canning from Dow Jones VentureSource, who projects more favorable policies for renewable energy after the fall national election.
Posted by Martin LaMonica
Dow Jones VentureSource on Friday said that venture capitalists plowed a record $3 billion last year in clean-tech companies, a 43 percent jump from the year before. The number of deals rose from 173 in 2006 to 221 last year.
"Our data shows that 59 percent of all U.S. investment in the sector is going toward companies in the product development phase, which suggests that funding for clean technologies is likely to continue as these companies continue to develop and start generating revenues," said Jessica Canning, director of global research, in a statement.
The median deal size in the U.S went up slightly to $8 million, which is a bit higher than all industries.
The biggest raising last year was $200 million for Project Better Place, the Shai Agassi-led company to set up a network of services stations with batteries for electric cars.
U.S.-based firms caught the lion's share of the money, with 83 percent of the global total. The total in the U.S. was $2.52 billion in 2007, a 79 percent increase.
Europe, led by Spain and Germany, saw a 27 percent increase to $360 million in venture capital. China, meanwhile, saw venture investing fall nearly 70 percent to $129 million, although four venture-backed companies went public.
So is this outpouring of venture dollars all good news for energy and environment entrepreneurs? Not entirely.
There is ongoing concern that certain areas within clean tech, notably solar and biofuels, are becoming an over-heated financial bubble that cannot sustain the influx of new companies.
This is a typical pattern of large investment waves, which are often followed by consolidation among companies and company failures.
More specific to clean tech is a funding gap, sometimes referred to as the "Valley of Death."
Unlike software or medical devices, energy-related companies require large amounts of capital to prove out their technology as cost-effective. A biofuels plant, for example, can cost more than $100 million--beyond the funding venture capitalists are able to do. Project financiers typically back only well proven technologies, as a report by Ernst & Young noted. Click here for PDF.
Ernst & Young recommends looking to government sources of money, reducing technology risk, and using debt selectively for financing.
Despite this funding challenge and regulatory hurdles, Dow Jones VentureSource sees significant potential. Both consumers and businesses are interested in buying eco-conscious products and, because the energy business is so big, gaining a small amount of market share from incumbents can be very profitable.
"The biggest factor driving investment in clean tech today is the huge consumer outcry for change," contends Canning from Dow Jones VentureSource, who projects more favorable policies for renewable energy after the fall national election.
Posted by Martin LaMonica
Saturday, February 9, 2008
Uma revolução no domínio da luz
Novas células solares abrem caminho para a era da energia farta, barata e renovável
Rafael Corrêa
A energia solar é uma das grandes esperanças para livrar o mundo da poluição causada pelas usinas termelétricas ao produzir eletricidade, mas por enquanto ela é uma alternativa cara, usada principalmente em pequenas comunidades com projetos subsidiados por governos. A partir de agora, está mais próximo o dia em que se poderá utilizar a energia do Sol para produzir eletricidade em larga escala. A empresa americana Spectrolab, uma subsidiária da Boeing, anunciou a criação de uma célula fotovoltaica capaz de transformar em eletricidade 40,7% dos raios solares que incidem sobre ela. Nas células convencionais usadas hoje nas usinas, esse aproveitamento é de apenas 22%. Isso significa que a nova célula é duas vezes mais eficiente. A novidade é o primeiro passo de uma revolução no setor energético. Usinas equipadas com a nova célula gerarão eletricidade ao preço de 8 a 10 centavos de dólar por quilowatt/hora, praticamente o mesmo que se paga hoje pela força gerada por termelétricas. "Considerando a evolução da pesquisa em energia solar, a invenção da nova célula é o equivalente a correr 1 milha (1.609 metros) em menos de quatro minutos", disse a VEJA Larry Kazmerski, diretor do Centro Nacional para Fotovoltaicos do Departamento de Energia americano, referindo-se ao recorde esportivo alcançado pelo inglês Roger Bannister em 1954 e que se acreditava inatingível.
As células fotovoltaicas produzem eletricidade absorvendo a energia da luz na forma de fótons e transformando-a em corrente elétrica. As células convencionais são feitas de silício, o mesmo material usado nos chips de computador. O grande achado da nova célula é utilizar diferentes tipos de material, em camadas sobrepostas. Cada camada absorve a energia de uma determinada cor do espectro da luz solar. Dessa maneira, a supercélula aproveita mais de cada raio que incide sobre ela com relação à célula convencional. A tecnologia é semelhante à usada para alimentar as baterias das sondas espaciais Mars Rovers, que há três anos pesquisam o solo marciano.
Se toda a energia que o Sol despeja sobre a Terra fosse aproveitada por células fotovoltaicas, bastaria uma hora de exposição para gerar a eletricidade consumida no mundo em um ano inteiro. Atualmente, apenas 0,01% da eletricidade usada no planeta vem do Sol. A produção de energia solar cresce à razão de 25% ao ano, mas essa expansão é praticamente restrita a três países, Alemanha, Estados Unidos e Japão. A nova célula pode ser o impulso que faltava para disseminar o uso dessa energia. O início de sua produção está previsto para 2008, e os primeiros lotes serão utilizados por companhias envolvidas em projetos de geração de eletricidade em larga escala. Um deles será instalado na província de Victoria, na Austrália, e terá a capacidade de gerar 154 megawatts de eletricidade, o suficiente para abastecer 45.000 casas. Para produzir a mesma quantidade de energia, uma usina termelétrica lança na atmosfera 400.000 toneladas de dióxido de carbono, o equivalente às emissões de 80.000 carros ao longo de um ano. "A célula supereficiente é uma tecnologia inovadora que abre caminho para toda uma nova geração de usinas solares", diz Kazmerski. "Em pouco tempo veremos células ainda mais potentes, capazes de converter 50% da energia solar em eletricidade", completa ele.
Friday, February 8, 2008
Taking the Web 2.0 route to green tech
When Benjamin Brown, the CEO of Web start-up MakeMeSustainable.com, hands you his business card, it's got "green" written all over it.
Rather than bleached white, it's the color of a supermarket bag and has a green fingerprint printed on the back.
MakeMeSustainable.com lets people see their energy usage and savings over time--as well as what their friends are doing.
(Credit: MakeMeSustainable.com)
Brown's not the only Web entrepreneur going with the recycled paper look. A growing number of tech and media entrepreneurs are trying to enter the booming green-tech industry via the Web.
Over the past five years, many IT professionals have made the jump to energy-related companies. Former Microsoftie Martin Tobias, for example, was CEO of biodiesel company Imperium Renewables, while the head of ethanol maker Range Fuels, Mitch Mandich, is a former Apple executive.
These IT veterans made the move either because there are more job opportunities, or because they want to work in an environmentally oriented field. Although they may lack technical know-how in energy, they contribute the speed and entrepreneurial culture of high-tech start-ups, the thinking goes.
By contrast, people like Brown feel that tapping social networking on the Web is the best way to build a business with an environmental slant.
"There's a lot of noise and a lot of great clean technologies are going to be created," Brown says. "The reason I wanted to go towards the Web is because, in the end, it's the individual consumer who will be driving those concepts and ideas."
MakeMeSustainable.com is sort of like Weight Watchers for carbon-conscious consumers. It allows people to evaluate their individual carbon footprint and track it over time while teaming with others.
The company, which spent two and half years building the software, is in the process of raising a Series A round of venture capital, said Brown, who is 25.
green Web sites
Over the past few years, there's been an explosion in green-themed Web media. Many sites act as hubs for environmentally aware people, providing news links and tips. There are sites to locate suppliers of green products or even to find a date with like-minded greenies.
The green Web reflects growing awareness of environmental issues. With the growth of social-networking sites, getting the word out online is a natural, particularly for younger people for whom socializing online is second nature. MakeMeSustainable released a Facebook application in December.
For people with software skills, green Web businesses are a tech-related career path that dovetails with their personal goals.
"The people who have Web 2.0 in their DNA, let's call it, are very alert and sensitive to this," said Andy Zaleta, a partner at recruiting firm Battalia Winston. "There's a social awareness created by the younger generation online."
There are many sites, which are counting on advertising revenue, that aggregate environmental news and tips. A few are emerging that emphasize social networking. A site called Carbonrally, offers teams of people regular challenges, such as using PC energy-management software. Teams can compete as they track the impact of their changes.
Brown said that eco-oriented consumers are getting to the point where they want hard numbers to back up their good intentions.
"Who the hell knows what is eco or green and people are getting tired of greenwashing," he said. "There's so much information out there, what we're seeking to be is a trusted quantitative source."
Topics:
February 6, 2008 10:50 AM PST
Taking the Web 2.0 route to green tech
Posted by Martin LaMonica
Rather than bleached white, it's the color of a supermarket bag and has a green fingerprint printed on the back.
MakeMeSustainable.com lets people see their energy usage and savings over time--as well as what their friends are doing.
(Credit: MakeMeSustainable.com)
Brown's not the only Web entrepreneur going with the recycled paper look. A growing number of tech and media entrepreneurs are trying to enter the booming green-tech industry via the Web.
Over the past five years, many IT professionals have made the jump to energy-related companies. Former Microsoftie Martin Tobias, for example, was CEO of biodiesel company Imperium Renewables, while the head of ethanol maker Range Fuels, Mitch Mandich, is a former Apple executive.
These IT veterans made the move either because there are more job opportunities, or because they want to work in an environmentally oriented field. Although they may lack technical know-how in energy, they contribute the speed and entrepreneurial culture of high-tech start-ups, the thinking goes.
By contrast, people like Brown feel that tapping social networking on the Web is the best way to build a business with an environmental slant.
"There's a lot of noise and a lot of great clean technologies are going to be created," Brown says. "The reason I wanted to go towards the Web is because, in the end, it's the individual consumer who will be driving those concepts and ideas."
MakeMeSustainable.com is sort of like Weight Watchers for carbon-conscious consumers. It allows people to evaluate their individual carbon footprint and track it over time while teaming with others.
The company, which spent two and half years building the software, is in the process of raising a Series A round of venture capital, said Brown, who is 25.
green Web sites
Over the past few years, there's been an explosion in green-themed Web media. Many sites act as hubs for environmentally aware people, providing news links and tips. There are sites to locate suppliers of green products or even to find a date with like-minded greenies.
The green Web reflects growing awareness of environmental issues. With the growth of social-networking sites, getting the word out online is a natural, particularly for younger people for whom socializing online is second nature. MakeMeSustainable released a Facebook application in December.
For people with software skills, green Web businesses are a tech-related career path that dovetails with their personal goals.
"The people who have Web 2.0 in their DNA, let's call it, are very alert and sensitive to this," said Andy Zaleta, a partner at recruiting firm Battalia Winston. "There's a social awareness created by the younger generation online."
There are many sites, which are counting on advertising revenue, that aggregate environmental news and tips. A few are emerging that emphasize social networking. A site called Carbonrally, offers teams of people regular challenges, such as using PC energy-management software. Teams can compete as they track the impact of their changes.
Brown said that eco-oriented consumers are getting to the point where they want hard numbers to back up their good intentions.
"Who the hell knows what is eco or green and people are getting tired of greenwashing," he said. "There's so much information out there, what we're seeking to be is a trusted quantitative source."
Topics:
February 6, 2008 10:50 AM PST
Taking the Web 2.0 route to green tech
Posted by Martin LaMonica
Thursday, February 7, 2008
Carbon Trading May Reward Indonesians for Saving Rainforest
By Jim Efstathiou Jr.
Feb. 7 (Bloomberg) -- Carbon trading markets may be used for the first time to help villages in Indonesia preserve trees, part of the global effort to stop deforestation that is speeding climate change.
Under a plan to be announced today to save the 1.9 million- acre Ulu Masen forest in Indonesia's Aceh province, about $26 million in revenue from the sale of carbon credits will go to villages that stop logging. The proposal hinges on the sale of credits to companies and individuals seeking to offset emissions and burnish their environmental reputations. The credits typically cost $4 to $8 per ton of pollution reductions.
There is no international agreement to reward developing countries for halting the burning of forests that accounts for 20 percent of global warming emissions, said John-O Niles, chief science and policy officer for Carbon Conservation, a project sponsor. The Ulu Masen plan to reduce emissions by 100 million tons over 30 years may help convince critics that saving forests can help slow the planet's warming, Niles said.
``There is for the global community and for the atmosphere a lot of value to maintaining the forests,'' Halldor Thorgeirsson, head of emissions trading at the UN Framework Convention on Climate Change, said in an interview. ``It's important that value is somehow transferred to the people that make decisions on the ground.''
The preservation plan for Ulu Masen will reduce emissions equivalent to Mexico's annual greenhouse-gas output, Niles said. It is the first project for avoiding deforestation to meet standards set by the Arlington, Virginia-based Climate, Community & Biodiversity Alliance to assure tradable carbon credits.
Energy Conversion
Trees store carbon dioxide, which is used in the conversion of light energy to chemical energy. Deforestation is the third largest source of carbon emissions after fossil fuel use and industrial operations, according to the UN.
Reducing emissions by saving forests was a priority at climate-change talks in December on the Indonesian island of Bali. The World Bank has launched funds to help developing countries monitor emissions reductions and market them, said Werner Kornexl, a senior technical specialist at the Washington- based bank.
``What we want to do in this partnership is set the stage for bigger market demand,'' Kornexl said in an interview. ``There is broad interest for this.''
Interest in credits from projects like Ulu Masen depends on standards that ``ensure the action is real,'' said Elliot Diringer, director of international strategies at the Pew Center on Global Climate Change, based in Arlington, Virginia.
`Stronger Action'
``It's a huge source of emissions and there's a willingness on the part of the tropical forest countries to undertake stronger action,'' Diringer said in an interview.
The Ulu Masen project was certified by the Climate, Community & Biodiversity Alliance, which includes non- governmental organizations such as The Nature Conservancy and the Rainforest Alliance and companies such as Intel Corp. and Weyerhaeuser Co. The designation means the project is ``extremely likely'' to produce credits beginning in 2009, Niles said.
Sponsors expect to reduce logging by 85 percent at Ulu Masen, which will generate credits representing 3.3 million tons of carbon a year, Niles said. At a projected price of $5 a ton, credits will generate $16.5 million.
Local villages will receive payments once they demonstrate trees haven't been logged, said Joanna Durbin, director of the alliance. Progress will be monitored on the ground by forest wardens and from the air through satellite images. Payments are projected to reach $26 million over the first five years.
Investor Risk
``The payments are based on results,'' Durbin said in an interview.
Certification to alliance standards also guarantees community and biodiversity benefits, such as maintaining wildlife habitats and clean water supplies, said Duncan Marsh, director of international climate policy at the Arlington-based Nature Conservancy. The forest is home to Sumatran elephants, clouded leopards, Sumatran tigers and Sumatran orangutans.
``Community and biodiversity aspects are an important attraction to investors,'' Marsh said.
Investors will also focus on risk, Marsh said. Credits for halting deforestation may not be used by companies to meet pollution targets under the European Union's greenhouse gas program or by countries under the Kyoto Protocol, an international accord to limit global warming gases.
`No Guarantee'
``If investments they make now do become eligible for credits in a future compliance regime, then the credits would be worth a lot more,'' Marsh said. ``There is no guarantee that will happen and those credits may continue to have the value they do on the voluntary market.''
Carbon credits from wind farms and solar power stations eligible in Europe's program and under the Kyoto pact traded at 14.25 euros ($21.09) Feb. 5 on the Nord Pool ASA exchange in Lysaker, Norway. There is little trade in credits from projects such as Ulu Masen, said Jason Patrick, director for greenhouse- gas services for the credit broker, Evolution Markets.
``There's a slow evolution from avoided deforestation as something that never happens to something that could be part of a future compliance system,'' Patrick said. There is ``speculative activity in avoided deforestation projects today with the expectation that there will be some sort of compliance value down the road.''
To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net .
Last Updated: February 7, 2008 00:17 EST
Feb. 7 (Bloomberg) -- Carbon trading markets may be used for the first time to help villages in Indonesia preserve trees, part of the global effort to stop deforestation that is speeding climate change.
Under a plan to be announced today to save the 1.9 million- acre Ulu Masen forest in Indonesia's Aceh province, about $26 million in revenue from the sale of carbon credits will go to villages that stop logging. The proposal hinges on the sale of credits to companies and individuals seeking to offset emissions and burnish their environmental reputations. The credits typically cost $4 to $8 per ton of pollution reductions.
There is no international agreement to reward developing countries for halting the burning of forests that accounts for 20 percent of global warming emissions, said John-O Niles, chief science and policy officer for Carbon Conservation, a project sponsor. The Ulu Masen plan to reduce emissions by 100 million tons over 30 years may help convince critics that saving forests can help slow the planet's warming, Niles said.
``There is for the global community and for the atmosphere a lot of value to maintaining the forests,'' Halldor Thorgeirsson, head of emissions trading at the UN Framework Convention on Climate Change, said in an interview. ``It's important that value is somehow transferred to the people that make decisions on the ground.''
The preservation plan for Ulu Masen will reduce emissions equivalent to Mexico's annual greenhouse-gas output, Niles said. It is the first project for avoiding deforestation to meet standards set by the Arlington, Virginia-based Climate, Community & Biodiversity Alliance to assure tradable carbon credits.
Energy Conversion
Trees store carbon dioxide, which is used in the conversion of light energy to chemical energy. Deforestation is the third largest source of carbon emissions after fossil fuel use and industrial operations, according to the UN.
Reducing emissions by saving forests was a priority at climate-change talks in December on the Indonesian island of Bali. The World Bank has launched funds to help developing countries monitor emissions reductions and market them, said Werner Kornexl, a senior technical specialist at the Washington- based bank.
``What we want to do in this partnership is set the stage for bigger market demand,'' Kornexl said in an interview. ``There is broad interest for this.''
Interest in credits from projects like Ulu Masen depends on standards that ``ensure the action is real,'' said Elliot Diringer, director of international strategies at the Pew Center on Global Climate Change, based in Arlington, Virginia.
`Stronger Action'
``It's a huge source of emissions and there's a willingness on the part of the tropical forest countries to undertake stronger action,'' Diringer said in an interview.
The Ulu Masen project was certified by the Climate, Community & Biodiversity Alliance, which includes non- governmental organizations such as The Nature Conservancy and the Rainforest Alliance and companies such as Intel Corp. and Weyerhaeuser Co. The designation means the project is ``extremely likely'' to produce credits beginning in 2009, Niles said.
Sponsors expect to reduce logging by 85 percent at Ulu Masen, which will generate credits representing 3.3 million tons of carbon a year, Niles said. At a projected price of $5 a ton, credits will generate $16.5 million.
Local villages will receive payments once they demonstrate trees haven't been logged, said Joanna Durbin, director of the alliance. Progress will be monitored on the ground by forest wardens and from the air through satellite images. Payments are projected to reach $26 million over the first five years.
Investor Risk
``The payments are based on results,'' Durbin said in an interview.
Certification to alliance standards also guarantees community and biodiversity benefits, such as maintaining wildlife habitats and clean water supplies, said Duncan Marsh, director of international climate policy at the Arlington-based Nature Conservancy. The forest is home to Sumatran elephants, clouded leopards, Sumatran tigers and Sumatran orangutans.
``Community and biodiversity aspects are an important attraction to investors,'' Marsh said.
Investors will also focus on risk, Marsh said. Credits for halting deforestation may not be used by companies to meet pollution targets under the European Union's greenhouse gas program or by countries under the Kyoto Protocol, an international accord to limit global warming gases.
`No Guarantee'
``If investments they make now do become eligible for credits in a future compliance regime, then the credits would be worth a lot more,'' Marsh said. ``There is no guarantee that will happen and those credits may continue to have the value they do on the voluntary market.''
Carbon credits from wind farms and solar power stations eligible in Europe's program and under the Kyoto pact traded at 14.25 euros ($21.09) Feb. 5 on the Nord Pool ASA exchange in Lysaker, Norway. There is little trade in credits from projects such as Ulu Masen, said Jason Patrick, director for greenhouse- gas services for the credit broker, Evolution Markets.
``There's a slow evolution from avoided deforestation as something that never happens to something that could be part of a future compliance system,'' Patrick said. There is ``speculative activity in avoided deforestation projects today with the expectation that there will be some sort of compliance value down the road.''
To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net .
Last Updated: February 7, 2008 00:17 EST
First rainforest-for-carbon-credits deal becomes a reality
Villagers in Aceh, the Indonesian province that suffered through three decades of civil war and lost some 170,000 people to the 2004 Indian Ocean tsunami, could soon see $26 million in carbon credits for protecting rainforests from logging under a deal announced today between conservationists, carbon traders, and the Aceh government.
The project — backed by the Government of Aceh, Fauna & Flora International (FFI) and Carbon Conservation — will protect the 1.9 million-acre Ulu Masen forest, a tract of rainforest home to the Sumatran elephant (Elephas maximus), the Clouded Leopard (Neofelis nebulusa), the Sumatran Tiger (Panthera tigris sumatrae), and the Sumatran Orangutan (Pongo abelii). By preventing logging and conversion of Ulu Masen forest for oil palm plantations, planners expect to reduce carbon dioxide emissions by 100 million tons over 30 years. The proceeds — in the form of carbon credits — will help fund health and education projects in the local community.
Critically, the project won the approval from the Rainforest Alliance's Climate, Community & Biodiversity (CCB) Standards, criteria meant to ensure that land use projects are designed to mitigate climate change and deliver compelling community and biodiversity benefits. The Ulu Masen project is the first project for reducing emissions from deforestation in developing countries (REDD) to be independently-approved as conforming to the CCB Standards.
"The project shows how solid partnerships with local communities are likely to deliver real reductions of greenhouse gas emissions by conserving a globally-significant tract of rainforest," said Dr. Joanna Durbin, Director of the CCBA. "We hope world leaders will adopt a policy framework that supports developing countries, forests, local and indigenous people and biodiversity to benefit from global climate change efforts."
"As Aceh’s Governor, I am very pleased that my office, Fauna and Flora International and Carbon Conservation passed the CCB audit," added Governor Irwandi Yusuf. "Aceh is serious about leading the world into a sustainable future, by implementing an integrated green approach to land and forest management and by curtailing illegal logging. This is only the first step. The hard work will be in financing and implementing our proposed project to help preserve the largest remaining bloc of unprotected Sumatran forests."
"We are ecstatic to be the first REDD project independently validated as meeting high global standards," said Dorjee Sun, CEO of Carbon Conservation. "The fate of tropical forests hinges on the ability of global carbon markets to rapidly mobilize adequate resources to communities with clear, defendable plans for reducing CO2 emissions. This conservation strategy is part of Aceh Green, a bold strategy in Aceh to develop green certified soft commodities, to relieve pressure on forests and provide sustainable livelihoods. We will be working with Merrill Lynch on the credit monetization strategy."
By creating a mechanism for funding rainforest conservation, REDD is seen by many as the best way to slow deforestation in the tropics. Already the World Bank has committed US$165 million to its newly created Forest Carbon Partnership Facility, a scheme that will offer tropical countries carbon offset credits to preserve forests.
February 7, 2008
The project — backed by the Government of Aceh, Fauna & Flora International (FFI) and Carbon Conservation — will protect the 1.9 million-acre Ulu Masen forest, a tract of rainforest home to the Sumatran elephant (Elephas maximus), the Clouded Leopard (Neofelis nebulusa), the Sumatran Tiger (Panthera tigris sumatrae), and the Sumatran Orangutan (Pongo abelii). By preventing logging and conversion of Ulu Masen forest for oil palm plantations, planners expect to reduce carbon dioxide emissions by 100 million tons over 30 years. The proceeds — in the form of carbon credits — will help fund health and education projects in the local community.
Critically, the project won the approval from the Rainforest Alliance's Climate, Community & Biodiversity (CCB) Standards, criteria meant to ensure that land use projects are designed to mitigate climate change and deliver compelling community and biodiversity benefits. The Ulu Masen project is the first project for reducing emissions from deforestation in developing countries (REDD) to be independently-approved as conforming to the CCB Standards.
"The project shows how solid partnerships with local communities are likely to deliver real reductions of greenhouse gas emissions by conserving a globally-significant tract of rainforest," said Dr. Joanna Durbin, Director of the CCBA. "We hope world leaders will adopt a policy framework that supports developing countries, forests, local and indigenous people and biodiversity to benefit from global climate change efforts."
"As Aceh’s Governor, I am very pleased that my office, Fauna and Flora International and Carbon Conservation passed the CCB audit," added Governor Irwandi Yusuf. "Aceh is serious about leading the world into a sustainable future, by implementing an integrated green approach to land and forest management and by curtailing illegal logging. This is only the first step. The hard work will be in financing and implementing our proposed project to help preserve the largest remaining bloc of unprotected Sumatran forests."
"We are ecstatic to be the first REDD project independently validated as meeting high global standards," said Dorjee Sun, CEO of Carbon Conservation. "The fate of tropical forests hinges on the ability of global carbon markets to rapidly mobilize adequate resources to communities with clear, defendable plans for reducing CO2 emissions. This conservation strategy is part of Aceh Green, a bold strategy in Aceh to develop green certified soft commodities, to relieve pressure on forests and provide sustainable livelihoods. We will be working with Merrill Lynch on the credit monetization strategy."
By creating a mechanism for funding rainforest conservation, REDD is seen by many as the best way to slow deforestation in the tropics. Already the World Bank has committed US$165 million to its newly created Forest Carbon Partnership Facility, a scheme that will offer tropical countries carbon offset credits to preserve forests.
February 7, 2008
Wednesday, January 2, 2008
The Solar Boom Creates Opportunities for Eco-Entrepreneurs
Things are looking sunny for the solar industry, but it's not out of the woods quite yet. Even with tax incentives and rebates, cost is still a major factor for many. The $25,000 - $30,000 price tag for the average solar system remains a fair chunk of change for most, and a shortage of silicon limited production and increased prices for panels in 2006. But these limitations are temporary.
Producers are ramping up production, financing is improving, and costs will fall as production continues to increase. According to the Solar Energy Industries Association (SEIA) , the cost of electricity produced by solar panels will drop to about 8-9 cents per kilowatt-hour in the next ten years, low enough to compete with natural gas or coal.
To ride this green wave, eco-entrepreneurs are pursuing a plethora of opportunities.
One such opportunity for eco-entrepreneurs lies in breakthrough technologies that drive down the price of solar. Companies such as Solaria are concentrating the sun's energy with mirrors onto a small area of panels, reducing the cost of the overall system. Another solar strategy being developed by technology startups like Flisom and Powerfilm is to produce flexible thin-films that can coat a surface to produce electricity. Others are developing utility-scale solar power systems that heat water or oil to generate electricity.
In addition to creating the technologies of tomorrow, there are plenty of other opportunities for solar today. As production of solar power continues to grow and becomes increasingly competitive with electricity from other sources, who is going to install all of these systems? Today, most solar systems in the U.S. are installed in the states with the biggest rebates and tax incentives. If more states join in, or nationwide incentives become more attractive, expect the solar wave to spread across the nation, creating opportunities for eco-entrepreneurs to install the panels as fast as the industry can produce them.
And who is going to be up on the roof doing the actual work? It won't matter how many panels are produced if there are not enough trained workers to install them. Solar companies are already running into a shortage of trained, qualified people. The ideal worker has a strong background in construction and electrical skills, with certified training specific to solar systems. Gerald Zepeda at Sun Light and Power says, "We often hire people with construction, plumbing, electrical, or similar experience and train them ourselves," helping them achieve certification by the North American Board of Certified Energy Practitioners (NABCEP).
Van Jones, Executive Director of the Ella Baker Center for Human Rights, may have one answer for deploying renewable energy in America's cities and keeping the green wave growing. Millions of people in the cities left behind by economic and environmental progress provide a ready pool of renewable energy workers, given the right training. Training people for new "green collar jobs" installing solar panels will keep the solar power growing, and get these people on track to rewarding careers and lives. As Jones says, they are not just creating jobs, but building "green paths out of poverty."
Eco-entrepreneurs can create training programs that provide the solar industry with the skilled workers it needs. Solar installers are doing their best to train the workers they need, but cannot keep pace on their own. Universities, community colleges, vocational schools and others are building renewable energy programs, but also find it challenging to keep up with demand. Eco-entrepreneurs should look for opportunities to align with solar companies that want to outsource their training to focus on what they do best, putting in solar systems. One of the bright points in the energy bill just signed into law is that it will provide as much as $125 million dollars to grants to train tens of thousands of workers in green collar jobs. It's just a start but from the solar industry perspective, but according to Zepeda , "it's a step in the right direction."
Although solar is growing rapidly, solar panels are still found on only a few scattered homes. Those who see the glass half empty might be discouraged by this, but those who see the glass half full will see a huge opportunity for solar still waiting to be realized. Success will be when every home generates its own electricity.
The opportunity does not stop with solar. Wind power, energy efficiency technology, and biofuels are all growing at a similar explosive pace. By one estimate, renewable energy in general already employs 8.5 million people in the US and might employ as many as many as 40 million people by 2030, accounting for a big chunk of the US economy as a whole. The environmental challenges we face are great, but the opportunities for eco-entrepreneurs willing to take on these challenges are limitless.
by Glenn Croston
Producers are ramping up production, financing is improving, and costs will fall as production continues to increase. According to the Solar Energy Industries Association (SEIA) , the cost of electricity produced by solar panels will drop to about 8-9 cents per kilowatt-hour in the next ten years, low enough to compete with natural gas or coal.
To ride this green wave, eco-entrepreneurs are pursuing a plethora of opportunities.
One such opportunity for eco-entrepreneurs lies in breakthrough technologies that drive down the price of solar. Companies such as Solaria are concentrating the sun's energy with mirrors onto a small area of panels, reducing the cost of the overall system. Another solar strategy being developed by technology startups like Flisom and Powerfilm is to produce flexible thin-films that can coat a surface to produce electricity. Others are developing utility-scale solar power systems that heat water or oil to generate electricity.
In addition to creating the technologies of tomorrow, there are plenty of other opportunities for solar today. As production of solar power continues to grow and becomes increasingly competitive with electricity from other sources, who is going to install all of these systems? Today, most solar systems in the U.S. are installed in the states with the biggest rebates and tax incentives. If more states join in, or nationwide incentives become more attractive, expect the solar wave to spread across the nation, creating opportunities for eco-entrepreneurs to install the panels as fast as the industry can produce them.
And who is going to be up on the roof doing the actual work? It won't matter how many panels are produced if there are not enough trained workers to install them. Solar companies are already running into a shortage of trained, qualified people. The ideal worker has a strong background in construction and electrical skills, with certified training specific to solar systems. Gerald Zepeda at Sun Light and Power says, "We often hire people with construction, plumbing, electrical, or similar experience and train them ourselves," helping them achieve certification by the North American Board of Certified Energy Practitioners (NABCEP).
Van Jones, Executive Director of the Ella Baker Center for Human Rights, may have one answer for deploying renewable energy in America's cities and keeping the green wave growing. Millions of people in the cities left behind by economic and environmental progress provide a ready pool of renewable energy workers, given the right training. Training people for new "green collar jobs" installing solar panels will keep the solar power growing, and get these people on track to rewarding careers and lives. As Jones says, they are not just creating jobs, but building "green paths out of poverty."
Eco-entrepreneurs can create training programs that provide the solar industry with the skilled workers it needs. Solar installers are doing their best to train the workers they need, but cannot keep pace on their own. Universities, community colleges, vocational schools and others are building renewable energy programs, but also find it challenging to keep up with demand. Eco-entrepreneurs should look for opportunities to align with solar companies that want to outsource their training to focus on what they do best, putting in solar systems. One of the bright points in the energy bill just signed into law is that it will provide as much as $125 million dollars to grants to train tens of thousands of workers in green collar jobs. It's just a start but from the solar industry perspective, but according to Zepeda , "it's a step in the right direction."
Although solar is growing rapidly, solar panels are still found on only a few scattered homes. Those who see the glass half empty might be discouraged by this, but those who see the glass half full will see a huge opportunity for solar still waiting to be realized. Success will be when every home generates its own electricity.
The opportunity does not stop with solar. Wind power, energy efficiency technology, and biofuels are all growing at a similar explosive pace. By one estimate, renewable energy in general already employs 8.5 million people in the US and might employ as many as many as 40 million people by 2030, accounting for a big chunk of the US economy as a whole. The environmental challenges we face are great, but the opportunities for eco-entrepreneurs willing to take on these challenges are limitless.
by Glenn Croston
Tuesday, January 1, 2008
December Wind Blows in the Right Direction for Vestas
If one company’s sales are a bellwether for the industry then the wind energy industry is set for years of solid growth.
Vestas Wind Systems, of Randers, Denmark, with a 28 percent market share and more than 33,500 wind turbines in service worldwide, is the world’s largest wind turbine manufacturer.
In 2006, the company delivered turbines with a total capacity of 4,239 megawatts — an increase of 1,054 megawatts or 33 per cent over the prior year. In spite of this increase, Vestas’ market share remained unchanged at the end of the year: Meaning everyone else is growing at roughly the same rate.
Vestas expects that the present wind power share of about one per cent of global power consumption will grow to at least 10 percent by 2020. The targets for renewable power in the EU and China will account for 20 percent and 15 per cent, respectively, in 2020, and the USA is expected to adopt similar targets. These targets mean that installed capacity is set to rise from 75,000 megawatts in 2006 to at least 1,000,000 megawatts in 2020, which translates into annual growth of more than 20 percent.
Vestas doesn’t announce all of its sales, usually just significant orders, but all of the following came in the last month of 2007 making December a particularly good month for the company:
--- AES Corporation, of Arlington, Virginia, ordered 52, V90 series 3.0 megawatt turbines for use in an unspecified project. The contract with Vestas includes delivery, installation and commissioning of the turbines, as well as a five-year service and maintenance agreement.
Delivery is scheduled to begin in the fourth quarter of 2008, with the project expected to be complete by the end of the following year.
AES is a worldwide developer of power projects of all kinds. The company entered the wind generation business in 2004, and now operates 1,000 MW of wind projects with another 4000 megawatts in the development pipeline.
Total nameplate capacity for this order - 156 megawatts.
--- UrbaenergÃŒa S.L., a subsidiary of the ACS/Cobra Group, ordered 32, V90 series 2.0 MW turbines for two projects in Spain. Twenty turbines will be for the Sierra de las Carbas project in the province of Zamora, and twelve will go to the Sargentes project in the province of Burgos. The order includes supply, installation, commissioning, and a five-year service contract.
Delivery of the turbines is scheduled to start in September 2008 and March 2009, for the Sargentes and Sierra de las Carbas projects, respectively. Commissioning is expected in February and September 2009, respectively.
Total nameplate capacity for this order - 64 megawatts.
--- From an undisclosed purchaser Vestas received an order for 36 turbines; 26, V90 series 2.0 megawatt units; and 10, V90 series 1.8 megawatt. The turbines will be for projects in Spain; Pujalt in Pujalt,Barcelona province and the Turo del Magre wind power plant stradled between San Guim de Freixenet, Lerida province, and Montmaneu, Barcelona province.
The two wind facilities will be the first established by Vestas in the Catalonia region of Spain. The region has a total installed capacity of 225 megawatts with a target of 1,000 megawatts planned for installation by 2010.
Delivery of the wind turbines is scheduled to start in December 2008 for the Pujalt project and in June 2009 for the Turo del Magre project. Commissioning is expected in July and December 2009, respectively.
Total nameplate capacity for this order - 70 megawatts.
--- Horizon Wind Energy, of Houston, Texas, placed an order for 242, V82 series 1.65 megawatt turbines scheduled for installation in various Horizon-owned wind projects in the US.
Vestas will supply and commission the turbines, and includes a five-year service and maintenance agreement. Delivery is expected to begin at the end of 2008 and will continue through 2009.
Horizon Wind Energy is a fully owned subsidiary of Portuguese utility Energias de Portugal, S.A. By the end of 2007, Horizon will have developed more than 2,200 megawatts of wind capacity and will be operating wind power plants with a total installed capacity of over 1,500 MW. Horizon has another 10,500 megawatts in over a dozen states in its development pipeline.
Total nameplate capacity for this order - 400 megawatts.
--- Duke Energy, of Charlotte, North Carolina, ordered 55, V82 series 1.65 megawatt turbines for the first phase of its Notrees Windpower project, located in Ector and Winkler counties in Texas.
Duke Energy, an electric and gas utility, has more than 1,000 megawatts of wind assets under development in the Western and Southwestern USA, including Texas and Wyoming.
Vestas will supply and commission the 55 wind turbines and provide service and maintenance for three years. The turbines are scheduled for delivery in the second half of 2008, and commissioning is expected to be completed at the end of 2008.
Total nameplate capacity for this order - 91 megawatts.
--- EarthFirst Canada, of Victoria, British Columbia, placed an order for 48, V90 series 3.0 megawatt turbines for its 144 megawatt Dokie Ridge project.
Dokie Ridge will be built in the Rocky Mountain foothills of the Peace River region in the northeastern part of the province of British Columbia, Canada.
Vestas will supply and commission the wind turbines, and delivery will begin in the first half of 2008 with commissioning expected to be completed in 2009. The order also includes a five-year service and maintenance agreement.
The Dokie Ridge project is expected to be the first wind power project installed in British Columbia, which has, as its goal, the acquisition of 90 per cent of its electricity generation from clean or renewable sources of energy.
Total nameplate capacity for this order - 144 megawatts.
--- Minerva, a project company of Alerion Energie Rinnovabili of Milano, Italy, ordered 27, V52 series, 850 kilowatt turbines for its project Castel di Lucio, near Messina in Sicily. The contract includes supply, installation, commissioning and a five-year service and availability agreement.
Delivery is scheduled to start in October 2008, and the project completed by March 2009.
Total nameplate capacity for this order - 23 megawatts.
All together, all orders, that’s 948 megawatts in turbine capacity ordered from one company in one month. It wasn’t too long ago when 948 megawatts was the entire industrywide, worldwide capacity built in one year.
The company calls itself No.1 in Modern Energy. Modern energy is precisely what wind energy is and will continue to be for some time to come.
Vestas Wind Systems, of Randers, Denmark, with a 28 percent market share and more than 33,500 wind turbines in service worldwide, is the world’s largest wind turbine manufacturer.
In 2006, the company delivered turbines with a total capacity of 4,239 megawatts — an increase of 1,054 megawatts or 33 per cent over the prior year. In spite of this increase, Vestas’ market share remained unchanged at the end of the year: Meaning everyone else is growing at roughly the same rate.
Vestas expects that the present wind power share of about one per cent of global power consumption will grow to at least 10 percent by 2020. The targets for renewable power in the EU and China will account for 20 percent and 15 per cent, respectively, in 2020, and the USA is expected to adopt similar targets. These targets mean that installed capacity is set to rise from 75,000 megawatts in 2006 to at least 1,000,000 megawatts in 2020, which translates into annual growth of more than 20 percent.
Vestas doesn’t announce all of its sales, usually just significant orders, but all of the following came in the last month of 2007 making December a particularly good month for the company:
--- AES Corporation, of Arlington, Virginia, ordered 52, V90 series 3.0 megawatt turbines for use in an unspecified project. The contract with Vestas includes delivery, installation and commissioning of the turbines, as well as a five-year service and maintenance agreement.
Delivery is scheduled to begin in the fourth quarter of 2008, with the project expected to be complete by the end of the following year.
AES is a worldwide developer of power projects of all kinds. The company entered the wind generation business in 2004, and now operates 1,000 MW of wind projects with another 4000 megawatts in the development pipeline.
Total nameplate capacity for this order - 156 megawatts.
--- UrbaenergÃŒa S.L., a subsidiary of the ACS/Cobra Group, ordered 32, V90 series 2.0 MW turbines for two projects in Spain. Twenty turbines will be for the Sierra de las Carbas project in the province of Zamora, and twelve will go to the Sargentes project in the province of Burgos. The order includes supply, installation, commissioning, and a five-year service contract.
Delivery of the turbines is scheduled to start in September 2008 and March 2009, for the Sargentes and Sierra de las Carbas projects, respectively. Commissioning is expected in February and September 2009, respectively.
Total nameplate capacity for this order - 64 megawatts.
--- From an undisclosed purchaser Vestas received an order for 36 turbines; 26, V90 series 2.0 megawatt units; and 10, V90 series 1.8 megawatt. The turbines will be for projects in Spain; Pujalt in Pujalt,Barcelona province and the Turo del Magre wind power plant stradled between San Guim de Freixenet, Lerida province, and Montmaneu, Barcelona province.
The two wind facilities will be the first established by Vestas in the Catalonia region of Spain. The region has a total installed capacity of 225 megawatts with a target of 1,000 megawatts planned for installation by 2010.
Delivery of the wind turbines is scheduled to start in December 2008 for the Pujalt project and in June 2009 for the Turo del Magre project. Commissioning is expected in July and December 2009, respectively.
Total nameplate capacity for this order - 70 megawatts.
--- Horizon Wind Energy, of Houston, Texas, placed an order for 242, V82 series 1.65 megawatt turbines scheduled for installation in various Horizon-owned wind projects in the US.
Vestas will supply and commission the turbines, and includes a five-year service and maintenance agreement. Delivery is expected to begin at the end of 2008 and will continue through 2009.
Horizon Wind Energy is a fully owned subsidiary of Portuguese utility Energias de Portugal, S.A. By the end of 2007, Horizon will have developed more than 2,200 megawatts of wind capacity and will be operating wind power plants with a total installed capacity of over 1,500 MW. Horizon has another 10,500 megawatts in over a dozen states in its development pipeline.
Total nameplate capacity for this order - 400 megawatts.
--- Duke Energy, of Charlotte, North Carolina, ordered 55, V82 series 1.65 megawatt turbines for the first phase of its Notrees Windpower project, located in Ector and Winkler counties in Texas.
Duke Energy, an electric and gas utility, has more than 1,000 megawatts of wind assets under development in the Western and Southwestern USA, including Texas and Wyoming.
Vestas will supply and commission the 55 wind turbines and provide service and maintenance for three years. The turbines are scheduled for delivery in the second half of 2008, and commissioning is expected to be completed at the end of 2008.
Total nameplate capacity for this order - 91 megawatts.
--- EarthFirst Canada, of Victoria, British Columbia, placed an order for 48, V90 series 3.0 megawatt turbines for its 144 megawatt Dokie Ridge project.
Dokie Ridge will be built in the Rocky Mountain foothills of the Peace River region in the northeastern part of the province of British Columbia, Canada.
Vestas will supply and commission the wind turbines, and delivery will begin in the first half of 2008 with commissioning expected to be completed in 2009. The order also includes a five-year service and maintenance agreement.
The Dokie Ridge project is expected to be the first wind power project installed in British Columbia, which has, as its goal, the acquisition of 90 per cent of its electricity generation from clean or renewable sources of energy.
Total nameplate capacity for this order - 144 megawatts.
--- Minerva, a project company of Alerion Energie Rinnovabili of Milano, Italy, ordered 27, V52 series, 850 kilowatt turbines for its project Castel di Lucio, near Messina in Sicily. The contract includes supply, installation, commissioning and a five-year service and availability agreement.
Delivery is scheduled to start in October 2008, and the project completed by March 2009.
Total nameplate capacity for this order - 23 megawatts.
All together, all orders, that’s 948 megawatts in turbine capacity ordered from one company in one month. It wasn’t too long ago when 948 megawatts was the entire industrywide, worldwide capacity built in one year.
The company calls itself No.1 in Modern Energy. Modern energy is precisely what wind energy is and will continue to be for some time to come.
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